RBI MPC – ‘Bold, strategic’: Financial experts laud RBI MPC decision to cut 50 bps repo rate, 100 bps CRR

Financial experts have lauded the Reserve Bank of India’s decision to slash repo rate by 50 bps to 5.5 per cent and Cash Reserve Ratio (CRR) by 100 basis points to 3 per cent. While some have found the Monetary Policy Committee decisions “way ahead of market expectations”, some are calling the strategy “bold”. 

The RBI on Friday stated that the policy repo rate will be cut by 50 basis points with immediate effect, and changed its stance from ‘accommodative’ to ‘neutral’. He said that the standing deposit facility (STF) rate stands adjusted to 5.25 per cent whereas the marginal standing facility (MSF) rate and bank rate shall stand at 5.75 per cent. 

He also announced that the CRR cut will be staggered in four phases. “The combined measures aim to boost lending and ease monetary conditions,” Malhotra said.

Kotak Mahindra Bank founder Uday Kotak said, “Monetary policy: bold and strategic. 50 bps rate cut, 100 bps CRR cut, move from accommodative stance to neutral. Nuanced combination of policy measures.”

Kotak AMC Managing Director Nilesh Shah said the RBI has “changed gears for big hits”. “A jumbo Repo Rate cut of 50 bps and a CRR cut of 100 bps is way ahead of market expectations. Both the bond and equity market will be positively surprised by the front loading and will over come the prudent measure of change in stance. President Trump may request US Fed to follow the RBI,” he said.

Capitalmind CEO Deepak Shenoy called it an awesome move but also batted for caution because a “neutral” stance means more rate cuts are unlikely. 

Economist Sanjeev Sanyal also called it an excellent move, while CIO Managing Partner Gurmeet Chadha, lauding the RBI’s decision said they launched “BrahMos, Pinaca and Akash” at the same time, referring to India’s defence and missile systems.

​​Pradeep Aggarwal, Founder & Chairman, Signature Global (India), said, “The twin reduction of the repo rate and cash reserve ratio provides significant relief for homebuyers across the country. This bold move by the apex bank comes at a crucial time when inflation is easing, and the economy requires strong stimulus to sustain growth. Lower borrowing costs will make home loans more affordable, thereby encouraging more buyers to enter the market. The reduction in CRR is expected to infuse significant liquidity in the banking system, which will prompt banks to lend even more.”

The markets reacted positively to the MPC decisions too. The Nifty Bank index rose by 1.39 per cent to reach 56,535.85 during the trading session. IDFC First Bank was the top gainer among the index constituents, increasing by 5 per cent to Rs 70.10. Axis Bank and Punjab National Bank also saw gains, rising 3 per cent each to Rs 1,193.70 and Rs 111.80, respectively Canara Bank was the only stock to decline in the Nifty Bank index during the session.