Quote Monetary Policy Committee by Mr. Ajit Banerjee President & Chief Investment Officer at Shriram Life Insurance Company
Below the Quote Monetary Policy Committee by Mr. Ajit Banerjee President & Chief Investment Officer at Shriram Life Insurance Company
As was widely expected the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) has unanimously decided to reduce the repo rate by 25 basis points to 6 per cent. This is 2nd consecutive rate cut of 25 bps of calendar year 2025. The rate cut of 25 bps was also accompanied with an unanimous decision by MPC to change its stance from “neutral” to “ accommodative”.
The RBI MPC has taken due cognizance of the global trade uncertainties prevailing and the potential impact it can have to disrupt the economic growth of the country and felt it is all the more necessary to be supportive of growth at this juncture and change of stance from neutral to accommodative was felt appropriate. India’s real gross domestic product is expected to grow by 6.5 per cent year-on-year, revised downward from the earlier projection of 6.7 per cent for the ongoing financial year 2025–26 . This downward revision of GDP estimate for FY 25-26 by 20 bps is in lieu of the uncertainties prevailing in the global trade and policy perspectives.
The Governor in very clear terms mentioned that with India’s retail inflation remaining with in target range and inflation outlook pointing towards a benign inflation level supported by a normal monsoon and current weak La Niña to be short lived the focus of MPC has shifted towards supporting growth. For the financial year 2025–26 (FY26), assuming a normal monsoon, the consumer price index (CPI) inflation is projected at 4 per cent, revised downward from the earlier forecast of 4.2 per cent.
From the Governors Post MPC meeting statement, it could be also inferred that RBI would ensure adequate liquidity in the system going forward to ensure effective transmission of the rate cuts to the borrowers. Overall, we feel the tone of the Governor’s policy to be dovish and growth supportive.
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