The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its three-day meeting today. Many experts believe that this meeting could result in a cut in the repo rate, which currently stands at 6%. This would be the third rate cut in a row if it happens.

The market is expecting a cut of 25 to 50 basis points (bps), mainly because inflation has been coming down and there are growing worries about slower economic growth. A lower repo rate would reduce the cost of borrowing for banks, businesses, and individuals.

WHAT THE MARKET EXPECTS
Anil Rego, Founder and Fund Manager at Right Horizons PMS, said a 25 bps cut in the repo rate to 5.75% looks likely. He said that with inflation now under control and signs of weak economic growth, the RBI may choose to support the economy with another rate cut.

He pointed out that headline CPI inflation has fallen below the RBI’s 4% target, which gives the central bank more room to cut rates. “Growth is showing softness, and global trade is expected to slow further in 2025,” he added.

He also explained that banks have already started reducing interest rates. “Savings account interest rates have dropped to 2.70%, and fixed deposit rates have come down by 30–70 basis points since February 2025,” said Rego.

According to him, there are fewer worries now about liquidity and financial stability. “Inflation is likely to stay within the RBI’s target, which makes it easier for the central bank to go ahead with a rate cut,” he said.

WHICH SECTORS COULD GAIN
Lower interest rates often help sectors that depend on borrowing and loans. Rego said, “Rate-sensitive sectors like banking, real estate, and automobiles may benefit. Banks may see stronger credit demand, real estate may become more affordable, and car sales may go up due to cheaper EMIs.”

He added that sectors linked to domestic spending and lending could be the first ones to benefit. A rate cut would also show that the central bank wants to support growth, which may lift market confidence.