Quote on RBI MPC Outcome by Abhishek Bisen, Head-Fixed Income, Kotak Mahindra AMC
Below the Quote on RBI MPC Outcome by Abhishek Bisen, Head-Fixed Income, Kotak Mahindra AMC
The RBI finally Goes for ‘Whatever it takes’ moment for India with the confidence of keeping inflation within target and aspiration of growing higher towards Viksit Bharat, RBI’s Monetary Policy Committee (MPC) has front loaded the rate cut with reduction in repo rate by 50 bps (with 5:1 vote) and making the repo at 5.5%. RBI has also decided to cut the Cash Reserve Ratio (CRR) requirement for banks by 1% reducing it to 3% in four tranches starting from 6th September 25. This will increase the banking system liquidity by ~Rs 2.5 lakh crores and ensure sufficient liquidity in the system in near future also. However, the MPC changed the stance to neutral. The RBI has reduced its projection for CPI inflation to 3.7% (from 4% earlier) and have kept the Indian GDP growth at 6.5% for FY26. With the stance changes to neutral and RBI Governor statement of front loading of rate cut in this policy, we expect further rate action to be data dependent, however, we believe there is scope for more 25 bps rate cut in this cycle, though timing of cut is uncertain. Headwinds continue to be from global variables with uncertainty of US tariffs and tensed geo political situation in parts of the world.
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