RBI Initiates Major Interest Rate and CRR Cuts to Stimulate Growth

Reserve Bank Governor Sanjay Malhotra announced a 50-basis point policy rate cut and a significant CRR reduction, totaling a 100 bps cut since February. These measures aim to stimulate economic growth amid projections of 6.5% growth and 3.7% inflation. However, future actions hinge on evolving economic data.

The Reserve Bank of India has embarked on significant monetary policy adjustments, reducing the policy rate by 50 basis points and announcing a notable cut in the Cash Reserve Ratio (CRR) to inject liquidity into the economy. Governor Sanjay Malhotra emphasized the measures' potential impact on economic growth and inflation.

Addressing the media post-policy unveil, Malhotra indicated the limited scope for future rate cuts. The central bank's growth projection stands at 6.5% while inflation is forecasted at 3.7%, necessitating adaptive future monetary actions based on incoming data signals.

The central bank's decision to cut the repo rate to 5.5% reflects its strategic shift from an accommodative to a neutral stance, acknowledging near-term growth challenges. The CRR reduction is set to boost credit flow, enhancing the banking system's capacity to lend to key productive sectors.

(With inputs from agencies.)