The Reserve Bank of India (RBI) on Friday kept its key interest rate unchanged, citing inflation risks, while reducing the Cash Reserve Ratio (CRR) by 50 basis points to 4 per cent. The move is expected to unlock ₹1.16 lakh crore in bank funds, easing liquidity stress in a slowing economy.
Experts welcomed the decision, noting that the policy balances inflation control with efforts to sustain economic growth. "The CRR cut is well-timed and practical, easing the liquidity situation and supporting credit and overall growth," said Harsha Vardhan Agarwal, President of FICCI.
RBI Governor Shaktikanta Das highlighted that inflation risks, particularly from rising food prices, remain a concern. The central bank projected fourth-quarter inflation at 4.5 per cent, with a gradual easing expected.
Chandrajit Banerjee, Director General of CII, called the CRR reduction a "specific CII ask," adding that it ensures additional resources for productive sectors. "With the anticipated easing of inflation, we can expect rate cuts in the foreseeable future," he said.
The policy also introduced the MuleHunter.AI tool to combat fraud in digital transactions. Banerjee said this move would "boost confidence among users and service providers to promote digital financial transactions."
Despite maintaining the repo rate, the RBI's guidance has raised hopes for rate cuts in the next policy. "If CPI inflation falls below 5 per cent by December 2024, a repo cut in February 2025 is likely," said Aditi Nayar, Chief Economist at ICRA.
Economists noted mixed economic signals, with a downward GDP growth projection of 6.6 per cent for the current fiscal year. However, Assocham Secretary General Deepak Sood expressed optimism, stating, "The growth trajectory should normalise above 7 per cent from Q4 of 2024-25."
The RBI also increased interest rate ceilings on FCNR(B) deposits to attract capital inflows. Mandar Pitale, Treasury Head at SBM Bank India, said, "While the increase will have a sentimental impact, incremental dollar inflows need to be closely watched."
On the fintech front, Rohit Arora, CEO of Biz2Credit, noted that the RBI’s balanced focus aligns well with technological innovation. "Leveraging AI for risk assessment can ensure resilience in the credit landscape despite inflationary pressures," he said.
Economist Arsh Mogre from Prabhudas Lilladher described the policy as a "delicate balancing act." He added, "The cautious approach indicates readiness for easing from February 2025 if inflationary pressures abate."
Looking ahead, Sandeep Bagla, CEO of Trust Mutual Fund, predicted a high likelihood of rate cuts in February. "Two out of six MPC members already voted for a rate cut, which strengthens this possibility," he said.
The RBI’s next monetary policy meeting is scheduled for February 2025.
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