Why RBI’s Rate Cuts Are A Good Signal

Let's Talk Money with Monika Halan

This week, Monika unpacks the Reserve Bank of India’s surprise 50 basis point cut in the repo rate—the third such cut this year, bringing the rate down to 5.5%. Alongside this, the central bank announced a phased reduction in the Cash Reserve Ratio (CRR) from 4% to 3%, injecting ₹2.5 trillion into the banking system. These moves signal a clear shift to an easy money policy—one that indicates inflation is under control and a strong push for growth is underway. Lower interest rates will reduce borrowing costs, encourage private investment, and boost business activity, while also lowering EMIs and loan rates. However, fixed deposit rates are likely to drop, making it a good time to lock in existing returns. With inflation forecast at 3.7% and GDP growth at 6.5%, this policy shift marks the beginning of a new growth cycle, with monetary and fiscal strategies finally working in sync.

She also breaks down a key monetary policy term—Statutory Liquidity Ratio (SLR). Unlike CRR, the SLR is the portion of a bank’s deposits that must be held in liquid assets like cash or government bonds. It remains steady at 18%, and plays a crucial role in maintaining banking system health. Monika helps listeners understand how the repo rate, CRR, and SLR interact to shape credit flow, manage inflation, and support the economy.

In listener questions, one listener seeks advice on whether to surrender or make a life insurance policy paid-up, prompting a walk-through of long-term return comparisons across options. Another listener asks how to find trustworthy financial guidance and upskill in money matters, and is directed to educational resources and fee-only financial planners. A third listener asks about investing for elderly parents, and the advice is to build personal financial stability first before offering financial support to others.

Chapters:

(00:31 – 07:18) RBI’s Easy Money Signal: Repo Rate, CRR, and Growth Forecasts

(07:19 – 08:30) Understanding SLR: The Third Key Monetary Tool

(08:31 – 13:25) Should I Surrender or Make My Policy Paid-Up?

(13:26 – 15:48) How to Start Financial Planning in Your 50s

(15:49 – 17:31) Helping Parents Financially: What Should You Prioritise?

https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=60605

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12858&Mode=0

https://tradingeconomics.com/india/interest-rate

http://www.Aria.org.in

If you have financial questions that you’d like answers for, please email us at ⁠[email protected]⁠

Monika’s book on basic money management

⁠⁠https://www.monikahalan.com/lets-talk-money-english/⁠⁠

Monika’s book on mutual funds

⁠https://www.monikahalan.com/lets-talk-mutual-funds/⁠

Monika’s workbook on recording your financial life

⁠⁠https://www.monikahalan.com/lets-talk-legacy/⁠⁠

Calculators

⁠⁠https://investor.sebi.gov.in/calculators/index.html⁠⁠

You can find Monika on her social media @monikahalan.

Twitter ⁠⁠@MonikaHalan⁠⁠

Instagram ⁠⁠@MonikaHalan⁠⁠

Facebook ⁠⁠@MonikaHalan⁠⁠

LinkedIn ⁠@MonikaHalan⁠

Production House: ⁠www.inoutcreatives.com⁠

Production Assistant:⁠ Anshika Gogoi⁠