What are fund managers saying about the RBI's bi-monthly monetary policy

Consumer price inflation fell to a record 1.5% in June adding pressure on the RBI to change the neutral stance it adopted five months ago

NEW DELHI (AP) - India's central bank cut its key interest rate by a quarter of a percentage point on Wednesday, raising hopes of lower borrowing costs for households as inflation ebbs.

Manoj Nagpal, CEO of Outlook Asia, says the market is already factoring in 25-basis-point rate cut from the RBI and bankers would be closely watching the RBI's policy stance for any change in both long-term deposit and lending rates.

Mumbai: Economists, lenders and media reports have been harping on about a policy rate-cut in the Monetary Policy Committee's (MPC) August meet scheduled.

While four members of the MPC voted for the 25 bps cut while non-RBI member Dr. Ravindra H. Dholakia voted for a policy rate reduction of 50 basis points.

This is the first rate cut since October 2016 and the interest rate is now at a six-year low. The banking system has hardly followed the cues from the central bank's monetary policies in the past - something highlighted by both Patel and Raghuram Rajan, the previous RBI governor. It is also relevant to note that there may not be another rate cut during the remainder of the year as the RBI will continue to look at inflation headwinds. This may create room for RBI to further cut policy rates in this year.

The six member monetary policy committee (MPC), headed by RBI governor Urjit Patel, made a decision to keep the reverse repo rate under the liquidity adjustment facility (LAF) stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent, ANI reported.

Acharya said the ongoing resolutions on the NPA front will also help in better transmission as the banks' balance sheet stress is resolved. The RBI's monetary policy committee reduced the policy rate to 6%, a six-and-a-half-year low, but maintained a neutral policy stance citing several uncertainties to the inflation trajectory. He said that core inflation, abandoning volatile food prices and administered prices, continued to slow to 3.05 per cent in July on yearly basis compared with 3.31 per cent, indicating weak people's buying power. However, the stock market, which had largely factored in the cut, declined.

RBI pushes for reinvigorating private investments, clearing infra bottlenecks and providing big thrust to PMAY.

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