Anticipated RBI Rate Cut: Boosting Festival-Driven Credit Growth in India
The Reserve Bank of India is expected to announce a 25 bps repo rate cut during the Monetary Policy Committee meeting from August 5-7, potentially boosting credit growth ahead of Diwali. With inflation under control, a preemptive rate cut could enhance consumer spending and mitigate output losses.
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According to a report by the State Bank of India, the Reserve Bank of India is anticipated to implement a 25 basis points repo rate cut during the upcoming Monetary Policy Committee meeting, scheduled from August 5 to 7. The report suggests that such a move could stimulate credit growth significantly, especially as it coincides with the early festive season.
The report underscores the historical impact of rate cuts before Diwali, referencing 2017 data where a 25 bps reduction resulted in an incremental credit growth of Rs 1,956 billion. A significant portion of this growth, approximately 30 percent, was attributed to personal loans during the festive period.
With inflation levels stabilized, the report argues that the RBI's continued restrictive policy could lead to irreversible output losses. It highlights the necessity of acting promptly, warning that delays could exacerbate economic challenges during this critical period.
(With inputs from agencies.)
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