The Reserve Bank of India’s 0.25 per cent rate cut on Friday has drawn a broadly positive response from bankers, who said the move keeps the window open for further easing to support GDP growth in the months ahead.

"The decision to cut rates while keeping the door open for future easing helps buffer the economy against potential unexpected shocks or external headwinds," C.S. Setty, the chairman of largest lender SBI, who also chairs the industry lobby grouping IBA, said in a statement.

He said the combination of a rate cut, a neutral stance and targeted liquidity interventions is aimed at sustaining economic momentum while safeguarding price and financial stability.

According to Setty, the policy delivered a "clear and confident message" that the Indian economy remains on strong footing, with robust growth accompanied by comfortably low inflation.

Banks have had a challenging year following earlier rate cuts from the RBI that narrowed net interest margins and affected core income.

Some in the sector argue that lower lending rates may encourage higher borrowing and that increased volumes could help compensate for the pressure on margins.

Indian Overseas Bank Managing Director and Chief Executive Ajay Kumar Srivastava said the policy review supports growth.

"The rate cut is expected to ease borrowing costs, spur demand in housing and real estate, support MSMEs and sustain personal and auto loan growth," he added.

He also welcomed the RBI’s two month drive beginning 1 January to address pending ombudsman complaints, saying it will strengthen customer service across the banking system.

Among foreign lenders, Standard Chartered Bank Chief Executive for India and South Asia P.D. Singh said the rate cut is backed by confidence in economic growth and well controlled inflation.

"The announcement of solid and timely liquidity measures to the tune of Rs 1.45 lakh crore by way of G-sec open market operation (OMO) purchases and forex swaps, along with the recent GST cuts, augur well for economic activity in the coming quarters," Singh said.

In the non bank segment, LIC Housing Finance Managing Director and CEO Tribhuwan Adhikari said the move will provide relief to homebuyers and that the company expects positive growth in affordable and mid-segment housing in the quarters ahead.

IndusInd Bank’s Rajiv Anand said the rate setting panel made use of the space created by CPI inflation slipping to a record low supported by a generalised decline across key constituents.

SVC Bank Managing Director Ravinder Singh said the rate cut and liquidity infusions create an opportunity for extending cheaper credit to borrowers.