RBI Monetary Policy: Reserve Bank of India (RBI) Governor Sanjay Malhotra has announced the Monetary Policy Committee’s decision to cut the policy repo rate by 25 basis points to 5.25 percent with immediate effect.
Consumer Price Index (CPI) inflation for the year is now projected at 2 percent again, about 0.6 percent downwaards from the earlier outlook of RBI. RBI further added it will conduct three-year dollar rupee buy sell swap of $5bn in December. Moreover, real GDP growth for Q1 next year is projected at 6.7%, and Q2 next year at 6.8%.
How the Markets Reacted to RBI Monetary Policy?
The Nifty bank index was trading at 59,349.05, up 0.10% before the policy announcement. Nifty Realty was at 892.45, up 0.26%, AND Nifty Auto stood at 27,764.00, up 0.11%.
After the RBI Monetary Policy announcement, Nifty Auto advanced 0.4% to 27,850.25, Nifty Bank rose 0.6% to 59,658.65, and Nifty Realty gained 1% to 899.05.
How the RBI Monetary Policy Announcement Helps the Common Man?
- The RBI Monetary Policy announcement means that home, personal, and auto loan EMIs will reduce, which will make repayments more affordable for the common man.
- Buying a car or home gets cheaper, which improves affordability for middle-class families.
- Educational loans and other lines of credit products will see lower interest rates, easing the burden on families.
- Lower borrowing costs will help micro, small, and medium sized enterprises (MSMEs) as well as small entrepreneurs get easy working capital.
How it Helps the Economy?
- Increased flow of credit supports economic growth and helps achieve higher gross domestic product targets.
- The RBI Monetary Policy announcement may help attract more domestic and foreign investment by improving the overall business environment.
- Business investment and expansion likely to get stimulated, especially in MSMEs and real estate.
- Banks will be encouraged to lend more supporting overall credit growth thanks to enhanced liquidity in the banking system.
- Improved business sentiment may result in new projects and job creation.
- The RBI Monetary Policy announcement signals confidence in inflation control, supporting macro-economic stability.
The RBI Monetary Policy announcement has brought joy to the Indian markets and the common man. It is expected that more repo cuts are in the cards too.
