RBI’s Jumbo Rate Cut Triggers Rupee Slide, Boosting Prospects
for NRIs in Gulf

Los Angeles/Jun 06, 2025
NRIpress.club/Ramesh/A.Gary Singh

The Reserve Bank of India has introduced a significant 0.5% reduction in interest rates, a move that could benefit Indian expatriates living in the UAE and other Gulf nations by influencing currency exchange rates in their favor.

Alongside the rate reduction, the Reserve Bank of India (RBI) also expanded the money supply, injecting more liquidity into the financial system to stimulate lending and investment activity.

The benchmark repo rate — the rate at which the RBI lends to commercial banks — now stands at 5.5%. This is the lowest it has been in three years and will influence the cost of borrowing for personal, auto, and home loans across the country.

RBI Governor Sanjay Malhotra explained the reasoning behind the decision, stating that current growth levels are not in line with the country’s aspirations. He emphasized the need to boost domestic consumption and capital investment, particularly as the global economic outlook remains uncertain.

This latest rate cut follows two earlier reductions in February and April, signaling a clear shift in the RBI’s monetary approach.

Recent economic data shows India’s GDP expanded by 6.5% in the financial year ending in March, a strong figure globally but still a significant drop from the 9.2% growth recorded in FY 2023–24.

Meanwhile, inflation has eased more quickly than expected. Retail prices fell to 3.16% in April, the lowest in six years and well below the RBI’s 4% inflation target. This decline has largely been driven by falling food prices.

In response, the RBI has revised its inflation forecast for the year, expecting price pressures to remain mild in the months ahead.

Despite these favorable trends, the RBI has shifted its policy outlook from “accommodative” to “neutral.” This suggests that future interest rate decisions will depend on how the balance between inflation and growth evolves over time.

Several factors are expected to help keep inflation under control, including a better monsoon that improved food supply, declining global commodity prices — especially oil — and a relatively strong rupee.

Lower interest rates are expected to benefit the wider economy by reducing borrowing costs. This will increase household purchasing power, cut production expenses for businesses, and lower the government’s debt burden.

One key sector that stands to gain is real estate. Reduced home loan rates could ease the burden on borrowers and revive demand, particularly in the affordable and mid-income housing segments.

“By lowering borrowing costs, EMIs for home loans become more manageable, making property more affordable for buyers,” said Anuj Puri, chairman of the ANAROCK Group. He added that this could drive a recovery in real estate markets that were heavily impacted during the pandemic.

Following the central bank’s announcement, Indian stock markets surged, reflecting investor confidence in the RBI’s efforts to support economic momentum.

News Source....Click Here