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Below the Quote on RBI MPC by Mr. Kishore Lodha, Chief Financial Officer, UGRO Capital

Today's MPC policy announcement has been extremely positive. Durable liquidity has reached comfortable levels over the last two months, and the 100 bps CRR cut will inject more than Rs.2 lakh crore into the banking system. This measure will further improve systemic liquidity while boosting bank profitability, as CRR balances don't earn any interest.

The RBI's successive interventions over the last 3-4 months to enhance system liquidity are paving the way for reviving robust credit growth, which had slowed last year.

The 50 bps rate cut exceeds market expectations, coming after two consecutive rate cuts in previous MPC meetings. This will benefit all borrower segments as we enter a lower interest rate cycle.

Bond markets have already priced in these rate cuts, with yields softening by nearly 100 bps over the past four months. However, banks haven't yet significantly reduced their MCLRs. Following today's cuts, we expect banks to lower their MCLRs accordingly. Loans linked to the repo rate will automatically follow this downward trajectory. Overall, these measures are extremely positive for the economy.

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