RBI Surprises with 50-Basis-Point Repo Cut, Sends Bond Yields Tumbling

Governor Shaktikanta Das convened an unscheduled mid-cycle monetary-policy meeting at 10:45 IST and delivered the steepest rate reduction since May 2020, slicing the repo to 5.75 % to pre-empt a global slowdown and unlock cheaper working capital for MSMEs ahead of the festive season. The six-member MPC voted 5-1, citing July’s retail inflation print of 3.8 %—the softest since September 2019—and a collapse in global commodity prices led by Brent crude slipping below $71. Ten-year benchmark G-Sec yields plunged 23 basis points to 6.42 %, the lowest in eighteen months, while overnight indexed swaps are now pricing in another 25-basis-point ease by December. Banking heavyweights HDFC Bank and ICICI Bank surged 5 % and 4 % respectively as traders bet on net-interest-margin expansion, even as mid-cap lenders such as Federal Bank and Karur Vysya rallied up to 9 % on hopes of higher credit uptake.

The policy pivot also unveiled a Rs 2-trillion targeted long-term repo operation earmarked for green infrastructure loans, signalling the central bank’s intent to crowd-in private capital for solar parks, transmission upgrades and EV charging corridors. Simultaneously, the RBI relaxed risk-weights on consumer durables and two-wheeler loans, a move expected to inject Rs 48,000 crore of fresh liquidity into the system ahead of Diwali. Currency traders saw the rupee pare earlier gains as the rate differential with the US narrowed, but exporters welcomed the weaker currency as a tailwind for software and pharma invoicing. Real-estate developers such as DLF and Macrotech jumped 7 % after the governor hinted at forthcoming guidelines allowing banks to extend 30-year amortisation schedules for affordable-housing projects without incremental capital charges.

Analysts are now debating whether the RBI has front-run a deeper global recession or merely bought growth insurance. Nomura has revised FY26 GDP growth up 40 basis points to 7.2 %, arguing the combined fiscal-monetary stimulus could add 200 basis points to consumption growth in the October-December quarter. Yet, voices within the MPC warn that food-price shocks from a patchy monsoon or a resurgent oil market could quickly reverse today’s dovish calculus. For now, Dalal Street is celebrating: the Nifty Bank index posted its best single-day gain since March 2024, and primary-market bankers report revived interest in a shelved Rs 8,500-crore IPO pipeline.