RBI policy announcement: Policy Decisions

 Here’s a summary of the key points from the RBI policy announcement:

Policy Decisions

Repo Rate: Cut by 50 bps to 5.50% (from 6.00%) to boost growth.

Standing Deposit Facility (SDF): Reduced to 5.25%.

Marginal Standing Facility (MSF): Set at 5.75%.

CRR: Cut by 100 bps to 3%, in four steps (Sep 6, Oct 4, Nov 1, Nov 29), releasing ₹2.5 lakh crore into the system.

Economic Rationale

Inflation has eased significantly; CPI forecast for FY26 cut to 3.7% (from 4%).

Core inflation remains under control.

Growth recovery is uneven; industrial output needs support.

Rate cuts are front-loaded to stimulate the economy.

MPC shifts stance to neutral, citing limited room for more rate support.

Macro & Sectoral Outlook

FY26 GDP growth forecast: 6.5%, with Q1 at 6.5% and Q2 at 6.7%.

CPI inflation forecast: 2.9% in Q1, 3.4% in Q2.

Domestic economy resilient, with strong consumption and investment signals.

Services sector strong; export growth expected to lift urban demand.

Agriculture outlook positive due to good monsoon forecasts.

External sector stable; current account deficit to remain low.

India remains attractive for foreign investors despite FDI slowdown.

Monetary and Financial Market Impact

RBI will continue providing liquidity to support credit flow.

Weighted Average Call Rate remains key policy anchor.

Bond yields reacted mixed:

10-year G-sec yield: rose to 6.1992% after falling to 6.1059%.

5-year yield: fell by up to 17 bps to 5.6739%.

Rate transmission to credit markets yet to be seen clearly.SHREEJI FINANCE & INVESTMENT