In a move that could further energize India’s economic recovery, the Reserve Bank of India (RBI) is widely expected to cut the benchmark repo rate by 25 basis points in its upcoming Monetary Policy Committee (MPC) meeting on Friday, June 6, 2025. If implemented, this would mark the third consecutive rate cut, following similar reductions in February and April, bringing the repo rate down to 5.75%.
The anticipation of a rate cut comes as inflation continues to ease and hover around the RBI’s medium-term target of 4%, providing the central bank with more flexibility to support growth through accommodative monetary policy. The six-member MPC, now headed by newly appointed RBI Governor Sanjay Malhotra, had already signaled a policy shift by changing its stance from neutral to accommodative in April — a sign of its willingness to stimulate economic activity.
Why Another Rate Cut Is Expected
Analysts believe that the RBI’s rate-cutting spree is far from over. Cooling inflation, a stable rupee, and robust foreign exchange reserves have opened the door for continued monetary easing. Moreover, with global interest rates stabilizing, India’s central bank is under less pressure to maintain a high rate differential.
“The macro environment is supportive of a rate cut,” said a Kritesh Abhishek, CEO at Tradebrains. “The RBI will likely use this opportunity to push credit growth and support core sectors that are crucial for India’s economic momentum.”
Key Sectors to Benefit from Lower Interest Rates
1. Banking and Financial Services:
A cut in the repo rate reduces the cost of borrowing for banks, enabling them to lend more at competitive rates. This could boost credit demand, enhance loan book growth, and improve asset quality as borrowers find it easier to repay loans. Investors can expect higher valuations in bank stocks as markets anticipate stronger earnings in the coming quarters.
2. Real Estate:
Lower interest rates directly benefit the housing market by making home loans more affordable. This is expected to revive residential sales, particularly in mid and premium housing segments. Real estate developers could also benefit from easier access to financing for new and ongoing projects, further stimulating construction activity and urban infrastructure growth.
3. Infrastructure:
The infrastructure sector stands to gain from cheaper capital, making large-scale projects more viable. With government focus on public works and urban expansion, lower rates can accelerate project execution, improve margins for developers, and unlock new growth opportunities. Infrastructure stocks could attract renewed investor interest on expectations of strong order books and margin expansion.
4. Automobiles:
Lower EMIs make car and two-wheeler loans more appealing, which could lead to a spike in vehicle sales across both passenger and commercial segments. Manufacturers may capitalize on this demand to launch new models and expand production. The expected rise in commercial vehicle sales also indicates a pick-up in logistics and construction activity, signaling improving business confidence.
5. NBFCs (Non-Banking Financial Companies):
NBFCs involved in funding real estate and infrastructure are likely to benefit significantly. Cheaper borrowing costs allow them to offer more competitive lending rates, boost loan disbursements, and widen profit margins. As economic activity gains traction, NBFCs are expected to play a central role in financing India’s growth story, particularly in underbanked and semi-urban regions.
Final Word
While the final decision lies with the MPC, market sentiment is clearly tilting towards an accommodative policy path. A third rate cut would underscore the RBI’s commitment to reviving demand and boosting economic momentum in a disinflationary environment.
If expectations materialize on June 6, investors and businesses across key sectors — from banking and real estate to autos and NBFCs — could be in for a growth-driven year ahead.
