Leading banks stated on Wednesday that the RBI rate decrease and the accommodating attitude adjustment are prompt and timely actions that would empower consumers and provide market advice to remain supportive against changing global concerns.

According to Binod Kumar, MD and CEO of Indian Bank, the 25 basis point rate drop is expected to increase demand for personal, house, and car loans, particularly in tier 2 and tier 3 markets where interest sensitivity is greater.

According to current trends, retail loans increased by more than 18% year over year. A reduced interest rate environment may help boost economic momentum and speed up spending.

“Indian Bank is fully geared to pass on the benefits swiftly and responsibly to our customers, ensuring inclusive credit growth,” he said in a statement.

The State Bank of India’s (SBI) chairman, C.S. Setty, claims that the change in position to one of accommodation would lessen the secondary effects of tariffs on the domestic economy.

“Growth imperatives will take precedence in FY26 with inflation under control,” he stated in a statement.

Setty said that the market-based securitisation framework for stressed assets, the revision of the gold lending policy, and non-fund-based facilities are all appropriate from a regulatory standpoint.

“Widening of the co-lending framework gives wider choices to all parties concerned,” he said.

In order to allow banks and NBFCs to broaden their scope beyond priority sector lending, which is presently limited, Reserve Bank Governor Sanjay Malhotra proposed a significant proposal to liberalise the RBI’s co-lending standards.

Under the current system, co-lending is restricted to bank-NBFC collaborations in priority sectors including microenterprises, agriculture, and loans to underserved groups.

Kumar claims that the shift to an accommodating approach is sentimentally favourable and makes space for improved liquidity and expansion.

They will work together to promote retail and MSME demand. The MSME sector, which makes up more than 40% of exports and over 30% of India’s GDP, would gain from this action as it will lower loan costs and enhance cash flows, both of which are essential for recovery and expansion in the changing market conditions,” he added.

Given that MSMEs are an essential component of Indian Bank’s lending portfolio, he anticipates an increase in the bank’s demand for loans.

“Lending to these sectors will be further strengthened by expanding the scope of co-lending,” he said.

“We expect two more rate cuts in 2025, with the next rate cut likely to be delivered in the June policy,” said Sakshi Gupta, Principal Economist at HDFC Bank.

“As liquidity conditions continue to improve, expected to average above neutral in the current quarter, transmission of rate cuts to money market rates and for deposit rates is also likely to increase,” Gupta said.