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The Reserve Bank of India (RBI) kept its key interest rate unchanged on Friday but cut the cash reserve ratio (CRR) that banks are required to hold, effectively easing monetary conditions as economic growth slows.

The Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.50% for an eleventh straight policy meeting.

The CRR was cut by 50 basis points to 4%, which will infuse 1.16 trillion rupees ($13.72 billion) into the banking system and bring down market interest rates.

COMMENTARY

ADITI NAYAR, CHIEF ECONOMIST & HEAD - RESEARCH OUTREACH, ICRA LIMITED, MUMBAI

"The MPC's decision to keep the repo rate unchanged was along expected lines, with the CPI inflation exceeding the MPC's upper threshold of 6.0%."

"However, the cut in the CRR by 50 bps would help support growth, after the sharp downward revision in the forecast for FY2025. If the CPI inflation retraces to below 5.0% by the Dec 2024 print, the likelihood of a repo cut in Feb 2025 will rise sharply."

DEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS AND RESEARCH, GURUGRAM

"The growth outlook has weakened since the last quarter, both domestic and global factors have contributed towards weak growth outlook. Inflation is the biggest risk for any economy and financial and growth stability can be achieved only when inflation is under control."

"The CRR cut to augment liquidity is likely to impact the market interest rate. The February 2025 rate cut is still not certain, it will be dependent on data."

UPASNA BHARDWAJ, CHIEF ECONOMIST KOTAK MAHINDRA BANK, MUMBAI

"The RBI delivered in line with our expectations. While retaining its focus on last mile disinflation being achieved the RBI has taken note of the tightening durable liquidity and hence delivered the CRR cut."

"We see room for a 25bp repo rate cut in February with much dependent on the downside risk to growth which we foresee. Further disinflationary trends and global environment will also be key."

RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE

"While the commentary softened to acknowledge cyclical growth risks, infusing permanent liquidity was accorded priority in light of the recent squeeze on account of tax outflows, a likely negative BOP balance in the quarter and stepped-up FX intervention."

"CRR stands to be lowered in phases, taking it to pre-pandemic levels."

ADITI GUPTA, ECONOMIST, BANK OF BARODA, MUMBAI

"RBI's rate decision was in line with our expectations. While noting risks to the growth outlook, the Governor stressed the need of maintaining a favourable inflation and growth balance."

"With inflation expected to moderate in the coming months, we believe that a rate cut in February 2025 looks most likely."

SHISHIR BAIJAL, CHAIRMAN AND MANAGING DIRECTOR, KNIGHT FRANK INDIA, MUMBAI

"The continued shift towards a neutral stance suggests that the central bank's focus is gradually moving from inflation control to supporting growth."

"At this point, a rate cut would be more beneficial for consumers, including home buyers, as borrowing costs remain high despite the unchanged repo rate. The growth in home loans has slowed, and consumption among lower-income groups has significantly decreased, as witnessed in sharp moderation in sales of affordable housing."

SONAM SRIVASTAVA, FOUNDER AND FUND MANAGER AT WRIGHT RESEARCH PMS, MUMBAI

"The RBI's measured approach provides a signal of confidence to markets while highlighting the need for collaborative fiscal and monetary efforts to navigate economic headwinds effectively."

G CHOKKALINGAM, MANAGING DIRECTOR OF RESEARCH AT EQUINOMICS RESEARCH, MUMBAI

"Though the benchmark interest rate is not reduced, the cut in CRR will give some relief for markets and financials. It also sets the stage for a rate cut in the near-term."

"We can expect the first cut in January or February 2025 certainly, as both Kharif and Rabi crop output are expected to be good and global oil price is down over 21% from its 52-week high. These two developments along with a reduced projection of GDP growth augur well certainty in rate cut within one of two months."

ANIRUDH GARG, PARTNER AND FUND MANAGER AT INVASSET PMS, MUMBAI

"The upward revision of the inflation forecast to 4.8% for FY25 indicates the RBI's cautious optimism, acknowledging supply-side challenges while aiming to anchor expectations."

"The CRR reduction... is a welcome move to boost liquidity and support credit growth, especially for sectors such as infrastructure and housing."

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU

"Expectedly, RBI kept the policy rate unchanged. We have been maintaining that the central bank has been behind the curve because of its growth optimism that was not borne out by emerging high-frequency data."

"We believe that a policy rate cut is not a panacea. While it will definitely help the slowing economy, we continue to assert that India’s slowdown is structural and not cyclical and real recovery would require policy interventions at multiple levels that can raise employment and wages."