New Delhi, Aug 6 (PTI) The Reserve Bank's status quo on the monetary policy provides more leg-room for another rate cut in the coming months depending on macro-economic data to boost growth amid tariff
headwinds, experts said on Wednesday.
The Reserve Bank of India (RBI) kept its repo rate unchanged on Wednesday, as policymakers weighed the risks posed by US President Donald Trump's trade policies and the uncertainties surrounding the potential for higher tariffs.
The six-member rate-setting panel, headed by RBI Governor Sanjay Malhotra, held the repurchase rate at 5.5 per cent in a unanimous vote and decided to continue with a 'neutral' stance.
Commenting on the monetary policy, Binod Kumar MD and CEO of Indian Bank, said that as RBI had front loaded rate cut, it was expected to maintain status quo.
"It is a welcome move. However, it leaves room to reconsider in coming months as CPI is benign and a push for growth may be required," Kumar said, adding that the Indian Bank has already passed on benefits of previous rate cut and expect further normalisation in MCLR as cost of fund continue southward journey.
Madan Sabnavis, Chief Economist at Bank of Baroda, said the credit policy was more or less on expected lines with a status quo on rates and a continuation of the stance being neutral. While underlying the strength of the economy which is to grow by 6.5 per cent, the policy has flagged the uncertainty on the trade front.
"...it does look like that this status quo can be persevered with for some more time unless there is any dramatic change in the conditions outlined in the policy. There can hence be at most one more rate cut which will be data dependent," Sabnavis said.
Amid uncertainties over global trade front, Governor Malhotra said the central bank is taking all necessary steps to support economic growth.
The pause on repo rate follows a 100 basis point cut in interest rate over three bi-monthly MPC meets in 2025.
Ranen Banerjee, Partner and Economic Advisory Leader at PwC India, too said the MPC has rightly pushed the pause button on the policy rates, given there is no immediate need to fire another rate cut bullet.
"The growth forecast has been retained at 6.5 per cent, which may come under some mild pressure but may not be very off, with a 10-20 bps downside risk. Any downsides on the external front are likely to be cushioned from the domestic demand uplift possibilities," Banerjee said.
Ajay Kumar Srivastava, MD and CEO, Indian Overseas Bank, said RBI's decision to enhance retail access to Treasury Bills via SIPs and the standardisation of bank locker and account claim settlements, are initiatives that are expected to further deepen financial inclusion and boost investor confidence.
"At Indian Overseas Bank, we see this policy stance as growth and stability oriented, and we are committed to supporting the credit needs of individuals and businesses alike," Srivastava said.
Seema Prem, co-founder and CEO of FIA Global, said the impact of the 100 bps rate cut since February on the economy has been broad-based and is still unfolding, the banks are passing it on in terms of lower lending rates, including for borrowers under the PM Mudra Yojana.
"The Governor's emphasis on building on bank account openings under PM Jan Dhan Yojana to develop resilience afforded by insurance and pensions augurs well," she said.
Anantharam Varayur, Co-Founder of Manasum Senior Living, opined that while a rate cut could have provided additional stimulus, the unchanged GDP growth forecast of 6.5 per cent for FY26 suggests a stable economic outlook.
"For the senior living housing sector, this stability in interest rates could be beneficial in the long run, as it may keep borrowing costs manageable for potential homebuyers," Varayur said.
Ashok Kapur, Chairman of Krishna Group and Krisumi Corporation, said while a rate cut would have further accelerated the demand for homes across segments, borrowing costs continue to remain at relatively accommodative levels, supported by the cumulative 100 bps reduction earlier this year.
"With the festive season approaching, stable interest rates and the continued transmission of past rate cuts are expected to keep housing demand buoyant - particularly in the mid and premium segments," Kapur said.
Rajkumar Singal, CEO of Quest Investment Advisors, said the RBI's decision clearly indicates the regulated approach towards controlling inflation while supporting economic growth in the country.
"Keeping interest rates steady when inflation is very much under control is a very good decision and will help in boosting positive sentiments in the economy while encouraging long-term investments in the economy," Singal added.
Parijat Agrawal, Head of Fixed Income at Union Asset Management Company, opined that given the ongoing trade and tariff-related disruptions, the MPC is in a pause mode and looking for rate transmission to take place.
"In our assessment, given the growth inflation dynamics, the rate environment is expected to remain benign with further rate reductions ahead. Hence, investors are advised to remain invested in light of the prevailing benign environment," Agrawal said.
Manappuram Finance Managing director V P Nandakumar said the RBI has decided to pause policy rates and maintain a neutral stance, mainly because it requires more clarity on upcoming inflation data and the final US tariff structure, as these are currently creating greater uncertainty.
"Therefore, the central bank believes that further easing is not necessary at the moment, as liquidity in the banking system is already in surplus, and the CRR cut announced earlier will further improve liquidity conditions," Nandakumar said. PTI NKD NKD
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