IGI Logo

Below the Quote on RBI Monetary Policy Committee by Umesh Mohanan, ED & CEO, Indel Money

"The chances are slim for a rate cut in the current (October) MPC meeting because the RBI is not convinced about the sustainability of the low inflation print. The retail inflation rate in August has fallen to 3.6% on an year-on-year basis, which is within the RBI’s tolerance limit of 4-6%. However, its durability is a concern. It is highly likely that the CPI-based inflation numbers may breach the current lows in the coming months due to multiple reasons. One, higher spending during the festive season may lead to a spike in inflation. Two, geopolitical conflicts in West Asia will push crude oil prices up, which will eventually trigger inflation in the domestic economy. So, this time, the MPC may adopt a wait-and-watch policy and maintain the status quo.

When we consider other factors like economic growth and liquidity, they do not warrant an immediate rate cut at the moment because India’s growth story is intact though there was a slight dip in the Q1 GDP growth numbers due to lower government spending and a slow growth in the agriculture sector. Though the liquidity condition is tight, it is not going to choke the system as the central bank is keeping a close watch on the situation.

As far as the gold-loan NBFCs are concerned, we demand monetary easing. We urge RBI to start the rate cut cycle because the high cost of funds is a major concern for us. Bank credit to NBFCs has fallen. In fact, banks themselves are struggling to raise deposits from the public. On one hand, the overall credit demand in the economy is surging and, on the other, funds have become dearer. Even at a higher interest rate, people are ready to borrow. In the long run, it is going to hurt consumption and GDP growth."

Above views are of the author and not of the website kindly read disclaimer