New Delhi: In a move that left the common man grappling with unchanged loan burdens, Reserve Bank of India (RBI) Governor Shaktikanta Das, in his final Monetary Policy Committee (MPC) meeting, announced a continuation of the status quo on the repo rate. The three-day deliberation concluded on Friday, with the repo rate holding steady at 6.30% for the 11th consecutive meeting. However, in a significant development aimed at economic stimulus, the RBI reduced the Cash Reserve Ratio (CRR) by 0.50%, bringing it down to 4%.
This decision, backed by four out of six MPC members, signals a strategic focus on inflation control while enabling banks to inject liquidity into the economy. The reduction in CRR frees up ₹1.20 lakh crore in banking reserves, paving the way for increased loan disbursements to fuel growth in manufacturing, consumption, and economic activity.
Unchanged Repo Rate: Common Man Gets No EMI Relief
Despite mounting expectations for relief in borrowing costs, the MPC once again refrained from altering the repo rate. This decision means no reduction in interest rates for loans, leaving equated monthly installments (EMIs) untouched. Governor Das emphasized that inflation remains the central concern, with efforts concentrated on stabilizing prices while maintaining the economy’s growth momentum.
Das acknowledged the persistent inflationary pressures through the third quarter but assured that relief is expected in the fourth quarter. “Our stance is neutral,” he stated, hinting at potential repo rate adjustments in future meetings based on evolving economic conditions.
CRR Cut to Boost Loan Disbursement and Economic Activity
The RBI’s decision to cut CRR by 50 basis points (bps) is expected to inject liquidity into the system, allowing banks to lend an additional ₹1.10–1.20 lakh crore. This move is designed to stimulate economic activity by boosting consumption and manufacturing. Increased lending capacity is anticipated to act as a catalyst for growth, ensuring faster circulation of funds across sectors.
Growth Projections Trimmed Amid Inflationary Pressures
Amid inflationary headwinds, the RBI revised its growth projections downward. The economic growth forecast for the current financial year was slashed from 7.2% to 6.6%. Similarly, projections for the first quarter of the next fiscal year were adjusted from 7.3% to 6.9%, though the second quarter forecast remains steady at 7.3%.
Key Takeaways
- Repo Rate: Held steady at 6.30%, offering no relief in loan EMIs.
- CRR Reduction: Slashed by 0.5%, unlocking ₹1.20 lakh crore for increased lending.
- Inflation Control: Governor Das emphasized controlling inflation while keeping future growth prospects in focus.
- Growth Rate Revisions: Economic growth forecasts trimmed to reflect current inflationary challenges.
As Governor Das bows out of his tenure, his final MPC meeting underscores a delicate balancing act: addressing inflationary concerns without compromising economic growth. The CRR cut provides a glimmer of hope for accelerated economic activity, even as inflation and high borrowing costs weigh on the common man’s finances.
