In line with expectations, the RBI’s Monetary Policy Committee maintained status quo on repo rate, while maintaining the policy stance as ‘neutral’. However, CRR got pruned by 50 bps to 4.00% of NDTL of banks.
Download ReportQuantEco Research || RBI Policy - Status quo, a cut, and a hike
In line with expectations, the RBI’s Monetary Policy Committee maintained status quo on repo rate, while maintaining the policy stance as ‘neutral’. However, CRR got pruned by 50 bps to 4.00% of NDTL of banks. This is in line with our expectation of normalization of reserve requirement in the post COVID recovery phase, with the backdrop of heavy foreign investment outflows since Oct-24 necessitating such a move. The resultant durable liquidity infusion of Rs 1.16 tn will help restore equilibrium in the money market spreads. In addition, the central bank announced a temporary 150 bps hike in deposit rate ceiling for NRIs (applicable until end Mar-25) to boost BoP position and lower the adjustment pressure on INR. The RBI lowered its FY25 GDP growth forecast by 60 bps to 6.6%, while the estimate for CPI inflation was raised by 30 bps to 4.8%. We believe the CRR cut will act as a precursor for an actual pivot in Feb-25 and continue to expect a 25 bps cut in the repo rate in the next policy review.