There seems to be a dissonance in what the MPC has put out in black and white
There appears to be a high likelihood of another pause in the February 2020 policy review
High small savings rates continue to be a structural curb on policy transmission efforts
"Liquidity requirements of NBFCs for the next three months is being monitored," Das added.
The MPC decided to keep the policy repo rate unchanged but continue with an accommodative stance to revive growth, which supported the market sentiment and helped cut losses.
Specifically for urban cooperative banks, the central bank is looking to issue structures to address cybersecurity concerns
Committee scaled up CPI inflation target for October-March to 4.7-5.1 percent
Most experts which Moneycontrol spoke to said that the central bank could well cut rates by 25 bps and may keep doors open for further easing to support growth in faltering Asia’s third-largest economy.
Beyond a point, the policy does not work due to specific obstacles to transmission channels
India’s real policy rate isn’t high compared to several emerging markets
Repo rate is poised for a cut. More than that, it’s the communication on continued easing that will aid transmission
We expect growth concerns to dominate and continue to pen down a cumulative 50bps rate cut in the rest of FY20 and a 25bps of a repo rate cut in the December policy itself.
Transmission will get stuck as market thinks that further rate cuts won’t be forthcoming. Fiscal slippages will add to pressures too.
MPC member Chetan Ghate said that it is premature to speculate on the impact of tax rate cut on the fiscal deficit.
An immediate investment revival may prove elusive, given moderate capacity utilisation levels
It is, however, imperative for banks to facilitate a faster transmission of these rate cuts to ensure that the measures reap results for the real estate sector, said experts.
Soft inflation and muted growth suggest there is room to cut rates further despite fears of fiscal slippage
Risk aversion among lenders and lack of demand are the key culprits
What’s left unsaid in the monetary policy resolution are the concerns about the fiscal situation.
The monetary policy committee, as expected, cut rates for the fifth consecutive time, but the quantum was below market expectations.
Markets will keenly await the MPC decision and seek a reason to celebrate the festivities well in advance.
Rate cut to deepen the coordinated counter-cyclical policy stimulus measures to revive consumption, investment and growth
On the scope of fiscal expansion, Das said that there is little space and the government has by and large remained prudent.
Based on tepid CPI numbers and a widening output gap, the RBI might take stronger action and reduce rates by 50bps in its October policy.
You have to wait out the reset period, which varies from three months to one year, to enjoy the benefits of the MCLR cut.