A 100 bps rate cut since February 2025 is a positive step to boost demand for loans or consumption, but deposit rates—especially for retail—are set to trend lower

1. Bank Credit: Borrowing Gains, But Recovery Slow

The Repo rate has been lowered by 100 bps in 2025, with the last 50 bps front-loaded in June .
Lower rates sweeten borrowing: however, credit growth remains muted at ~7% in May 2025 .
Borrowing rates are moving down—but reaching 2021‑22 lows (e.g., 6.5% home loans) may take time.

2. The Deposit Side: Savers Take a Hit

Banks have already cut Fixed Deposit rates by 30–70 bps since February .
Retail depositors—especially small savers—can expect further rate declines, prompting shifts toward income‑focused assets .

3. Impact on Bonds and Bond Issuance

Lower rates boost bond prices (inverse relationship), but markets have largely priced in the cuts already.
Corporates may rethink bond issuances, as falling yields can narrow the cost-benefit edge for funding .

4. Economic Growth: Boost or Wait-and-Watch?

Full-year GDP projection remains at 6.5%, despite the larger-than-expected rate cut .
Immediate uptick in growth is uncertain; real impact may unfold over the next 3–6 months.
Lower rates nudge consumption, with household savings trending up (~12%), potentially releasing pent-up demand .

5. Capex & Investment Cycle

Capacity use is high (75%+) but manufacturers are yet to revive capex significantly .
If demand strengthens, the next six months will show whether RBI’s cut translates into fresh corporate investment.

6. Bank Profits & NIM Outlook

CRR cut will flood ₹2.5 lakh crore into the system, easing funding costs .
Loan yields drop faster than deposit rates: this pressures margins initially, but banks may recover NIMs by Q3–Q4 FY26.
Banks with high CASA ratios and floating-rate loans benefit most .