Quote on RBI MPC by Krishna Appala, Fund Manager, Capitalmind PMS
Below the Quote on RBI MPC by Krishna Appala, Fund Manager, Capitalmind PMS
The RBI’s June 2025 policy signals a decisive tilt toward growth. A sharp 50 bps repo rate cut, coupled with a 100 bps reduction in the CRR, is set to inject 2.5 lakh Cr of liquidity into the banking system — a meaningful move in magnitude and intent. These actions come as inflation prints hit multi-year lows, with FY26 CPI now projected at 3.7%, down from 4%. The central bank’s growth optimism is underlined by a steady 6.5% GDP forecast and expectations of a strong rural economy aided by an above-normal monsoon. India’s services exports remain robust, and external balances are healthy with forex reserves at $690 billion and a contained current account deficit. Notably, there has been no major movement in the USDINR, and the 10-year G-Sec yield remains soft at 6.19%, reflecting bond market confidence.
Rate-sensitive sectors stand to benefit — especially financials, real estate, and manufacturing — though the transmission may be slower, given muted credit offtake. Despite abundant liquidity, both corporate borrowing and bank lending remain subdued. Meanwhile, debt mutual funds have delivered strong returns over the past year, and falling rates may challenge fixed deposit yields going forward. The RBI’s change in stance to ‘neutral’ signals a pause in further easing. While another rate cut may still be on the table, it’s likely the central bank will now wait and watch. Overall, this policy reinforces India’s macro stability while attempting to reignite demand in a measured, credible way.
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