Quote on RBI Monetary Policy Committee Announcement by Dr. Manoranjan Sharma, Chief Economist at Infomerics Ratings
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Below the Quote on RBI Monetary Policy Committee Announcement by Dr. Manoranjan Sharma, Chief Economist at Infomerics Ratings
The MPC has taken the right call and is entirely in line with our expectations. The RBI has kept the repo unchanged at 6.5 % since February 2023, and given the macroeconomic landscape, this is not the right time to tweak this rate. There was a strong case for a CRR cut to ease liquidity without spiking inflation. This would also provide banks with additional resources to support credit growth and strengthen financial stability. The decelerating growth would induce a cut in the RBI’s growth projections for FY25- the RBI cut the growth forecast to 6.6% from the earlier 7.2%. We also anticipated that the neutral stance would continue.
The cash reserve ratio (CRR) for all banks will be reduced to 4 % of net demand and time liabilities (NDTL) in two tranches of 25 basis points each, effective from 14 and 28 December. This measure will infuse Rs 1.15 lakh crore of liquidity into the banking system, which will, therefore, provide a fillip to the credit process and also give an impetus to GDP growth. With the RBI keeping the Repo rate steady at 6.5%, all external benchmark lending rates (EBLR) linked to the Repo rate will not increase. Hence, the borrowers' equated monthly installments (EMIs) will not rise.
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