RBI's Rate Cut Sparks Optimism: Growth Takes Center Stage

RBI's Monetary Policy Committee cuts repo rate by 25 bps, shifting stance to accommodative. Experts praise focus on growth, expecting further rate reductions. Policies aim to enhance credit offerings for micro and small enterprises, with liquidity measures supporting the downward trajectory of interest rates amid global uncertainties.

The Reserve Bank of India's (RBI) Monetary Policy Committee has cut the repo rate by 25 basis points, reducing it from 6.25 percent to 6 percent, a decision welcomed by market experts. Shriram Ramanathan, CIO, Fixed Income, HSBC Mutual Fund, stated that the rate cut meets market expectations, coupled with a strategic shift to an accommodative stance. The committee now believes the headline CPI is consistently aligned with the 4% target, allowing an unwavering focus on economic growth.

Ramanathan further noted the RBI Governor's indications of a continued softening trend in policy rates, projecting a movement towards 5.5% by CY2025. Enhanced liquidity measures are anticipated to bolster interest rate reductions. Rajeev Radhakrishnan, CIO of Fixed Income at SBI Mutual Fund, highlighted the decisive shift to an accommodative approach, signaling confidence in aligning future inflation with the policy target of 4% while mitigating global uncertainties.

Mayur Modi, Co-founder and COO of Moneyboxx Finance Limited, emphasized the implications for NBFCs, noting that reduced funding costs enable more affordable credit offerings for micro and small enterprises. He pointed to initiatives like expanded co-lending frameworks and securitization of stressed assets as pivotal to strengthening the lending ecosystem, increasing liquidity, and sharing risks.

(With inputs from agencies.)