Rate Easing Boosts Banking, NBFCs, Real Estate, and Auto Sectors
A report by Nexedge Research highlights the positive impact of falling interest rates on rate-sensitive sectors such as banking, NBFCs, real estate, and automobiles. The Indian economy is experiencing a phase of low inflation and ample liquidity, which is expected to drive stronger credit flow and improved demand.
Interest RatesBankingReal EstateNbfcsAutomobilesReal Estate NewsJun 07, 2025
The report states, 'Banking, NBFCs, real estate, and automobiles are well positioned to benefit from lower borrowing costs.' This positive outlook is underpinned by the Indian economy's transition into a phase characterized by benign inflation and ample liquidity, which is creating a sustained low-interest rate environment.
This trend is already evident in the falling money market rates and a notable softening in the 10-year government bond yield. The decline in yields has not only boosted bond prices but also improved return prospects for fixed-income investors. According to the report, 'Money market rates and bond yields are trending lower, with the 10-year G-sec yield already softening, boosting bond prices and supporting fixed-income returns.'
Inflation is currently hovering near the lower end of the Reserve Bank of India's (RBI) target range of 2-6 per cent. With the RBI maintaining a neutral policy stance, the market is beginning to price in the possibility of further rate cuts. This combination of falling inflation and proactive monetary easing is seen as supportive for both equity and bond markets.
The report suggests that these factors together are strengthening the medium-term macro outlook, offering a positive backdrop for investors and further momentum for India's economic growth. The RBI's Monetary Policy Committee recently cut the repo rate by 50 basis points to 5.50 per cent. This larger-than-expected cut marks the third consecutive reduction in 2025, totaling 100 bps of easing since February.
Consequently, the Standing Deposit Facility (SDF) rate stands adjusted at 5.25 per cent, and the Marginal Standing Facility (MSF) rate and Bank Rate are set at 5.75 per cent. The RBI has also reduced the Cash Reserve Ratio (CRR) by 100 bps to augment durable liquidity in the banking system.
This CRR cut will be implemented in phases, beginning on September 6, 2025, and concluding on November 29, 2025. The reduction is expected to release roughly ₹2.5 trillion of liquidity by November 2025, bolstering bank lending capacity and further supporting the economy.
Frequently Asked Questions
Which sectors are expected to benefit from the easing interest rates?
The sectors expected to benefit from the easing interest rates include banking, NBFCs, real estate, and automobiles.
What is the current inflation range set by the RBI?
The current inflation range set by the RBI is 2-6 per cent.
How much has the RBI cut the repo rate in 2025?
The RBI has cut the repo rate by 100 basis points in 2025, with the latest cut being 50 basis points to 5.50 per cent.
What is the impact of the CRR cut on the banking system?
The CRR cut is expected to release roughly ₹2.5 trillion of liquidity by November 2025, which will bolster bank lending capacity.
What are the key factors supporting both equity and bond markets?
The key factors supporting both equity and bond markets are falling inflation, proactive monetary easing, and a sustained low-interest rate environment.
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