RBI Holds Rates, Shifts Stance: Rate Cut Expected Soon - Experts

New Delhi, Oct 9 (PTI) The RBI's decision to keep the benchmark interest rate unchanged while shifting to a 'neutral' policy stance opens the door for a rate cut in the near future, experts said on Wednesday.

The central bank kept its key interest rate unchanged on Wednesday but took the first step towards a rate cut as it eased its relatively hawkish policy stance to 'neutral' from its earlier 'withdrawal of accommodation' stance.

The RBI maintained the status quo despite the US Federal Reserve lowering the benchmark rates by 50 basis points last month. The central banks of some developed nations have also reduced their interest rates.

Announcing the fourth bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent.

The RBI has maintained the status quo on benchmark interest rates since February 2023.

Das said the RBI will remain watchful of elevated food inflation even when India's GDP growth remains strong.

Abheek Barua, Chief Economist and Executive Vice President, HDFC Bank, said: "The RBI remains in a wait-and-watch mode to assess domestic developments like the monsoon performance, food inflation, and the new fiscal strategy before moving on rates. We continue to see the possibility of a rate cut in Q4 2024".

According to Ajay Kumar Srivastava, Managing Director and CEO, Indian Overseas Bank, the RBI's decision to keep the repo rate unchanged at 6.5 per cent is a balanced approach towards fostering growth while managing inflationary pressures.

"If inflation remains under control and economic conditions stabilise, there's a greater likelihood that the RBI may reduce the repo rates in the upcoming meetings. Should this occur, as the industry expects, borrowers might see lower EMIs by December or early 2025, though this could vary by bank. New loan borrowers could also benefit from a more favourable lending environment if the RBI lowers rates in the near future," Atul Monga - CEO and co-founder, BASIC Home Loan, said.

Vivek Iyer, Partner, Grant Thornton Bharat, said that as expected, the RBI Governor kept the repo rate unchanged, however with a change in the stance to neutral from the earlier stand on 'withdrawal of accommodation', given that the inflation and growth risks seem to be balanced and the supply chain risks given the geo-political risks are yet evolving.

"Keeping the rates stable and changing the policy stance to neutral is a very prudent policy of the RBI. The RBI has rightfully prioritised domestic macro-economic factors, keeping inflation under control and supporting GDP growth which is expected to be 7.2 per cent for FY25. Change in RBI policy stance will encourage more investment into India and encourage Govt as well as private sector investments into new projects," Sadaf Sayeed, CEO at Muthoot Microfin, said.


Dilip Modi, founder and CEO of Spice Money, said the RBI's decision to increase the UPI 123Pay transaction limit to Rs 10,000 and the UPI Lite wallet limit to Rs 5,000 is poised to be a transformative step towards deepening digital financial inclusion in India, particularly in rural and semi-urban areas.

This was the first meeting of the reconstituted MPC. The three newly appointed external members are Ram Singh, Saugata Bhattacharya and Nagesh Kumar.

The MPC was reconstituted by the government earlier this month.