In a strong push to revive economic momentum and improve rate transmission, the Reserve Bank of India today cut the repo rate by 50 basis points and unexpectedly slashed the cash reserve ratio by 100 basis points. This is the third straight easing move in 2025, adding to February and April’s combined 50-basis-point cuts. But structural frictions in the banking system may still blunt their impact on the broader economy.Monetary policy sets the necessary conditions for easing, but not the sufficient ones. The RBI’s intent is clear: amplify transmission and stimulate credit by infusing liquidity into the banking system. This requires more than just policy signals.
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