The Reserve Bank of India’s monetary policy committee, as
expected, slashed policy rates for the fifth time in a row on October 4, but
the quantum was lower than market expectations.
The Indian rupee and bond prices fell after the RBI
announced a cut in repo rates by 25 basis points to 5.15 percent. The Indian
market also pared gains, while rate-sensitive stocks turned negative. But, the
big takeaway is that the central bank and the government are in sync on the
policy response to revive faltering growth in Asia’s third-largest economy.
“RBI has once again proved to be well ahead of the curve in
unleashing monetary efficacies to combat the economic slowdown, in perfectly
complementing the fiscal initiatives,” Dr K. Joseph Thomas, Head Research-Emkay
Wealth Management
“In conformity with this aggressive approach, RBI is likely
to continue with its campaign for more rapid transmission of the benefits to
credit users, through lower rates to a large extent linked to the base rate.”
Top 10 takeaways from
the fourth bi-monthly monetary policy statement, 2019-20:
1. Rate cut
2. Stance
3. Inflation
4. GDP growth
5. Majority decision
6. Monetary Transmission
7. Lending limit increased for NBFC-MFIs
8. Offshore rupee markets
9. Liquidity support for NEFT
10. Internal ombudsman for large non-bank Prepaid Payment Instrument (PPI) issuers
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