The BFSI industry expected banks to ease their fists and lend more to corporates
MUMBAI, Dec 6 (The CONNECT)- The Reserve Bank of India has decided to keep the interest rate regime unchanged citing the above tolerance level inflationary pressures and the unexpected drop in the GDP.
Here are some comments from the BFSI sector:
Deepak Ramaraju, Senior Fund Manager, Shriram AMC: The cut in CRR and bottoming out of the slowdown will augur well with the equity markets in the medium term. The cut in CRR was a welcome move and will lead to improved credit growth due to increased liquidity in the system. The earnings are expected to pick up in Q4 FY 25 which will be supported by a pickup in government spending.
K V Srinivasan, Director and CEO at Profectus Capital: The RBI has maintained status quo, clearly expressing its discomfort on inflation levels. With GDP growth rates moderating and with private sector capital expenditure yet to pick up, perhaps they would signal soft interest rates sometime in the near future. CRR reduction by 50 bps should improve liquidity during the busy season, which should help with working capital management. The MSME sector would greatly benefit from a benign interest rate regime and have much more incentive to upgrade and modernise operations, leading to a significant competitive advantage.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank: The RBI delivered in line with our expectations. While retaining its focus on last mile disinflation being achieved the RBI has taken note of the tightening durable liquidity and hence delivered the CRR cut. We see room for a 25 basis points repo rate cut in February with much dependent on the downside risk to growth which we foresee. Further disinflationary trends and global environment will also be key.
Vishal Goenka, Co-Founder of IndiaBonds.com: RBI policy remained steady with notable changes in inflation forecast being higher than before and growth expectations marked lower. A very balanced policy once again and commendable in light of global and domestic economic complexities.
Fixed income investing prefers a stable, almost ‘boring’ environment and that is exactly what has been delivered. Investors to continue using fixed income for effective portfolio construction. A barbell strategy with buying short end corporate bonds with long end g-Sec and bank infra bonds is suggested for benefiting from carry as well as potential capital gains.
Puneet Pal, Head- Fixed Income, PGIM India Mutual Fund: We think today’s policy was a continuation of the calibrated approach adopted by RBI over the past one year with emphasis on sustained and durable disinflation along with strengthening of the underlying macroeconomic variables.
FTSE Russel Index has included India’s FAR securities in its index beginning Sept 2025 and thus currently the FAR securities are included in three Emerging market Indices. This is a long-term positive and leads to favourable demand-supply dynamics. Going ahead, we believe that yields will continue to drift lower on the back of steady and low inflation, and growth slowdown, which we believe can undershoot RBI’s projections and continuation of the monetary easing cycle across the world and investors can use any uptick in yields to increase their Fixed income allocation. Investors with medium to long-term investment horizons can look at funds having duration of 6-7yrs with predominant sovereign holdings as they offer a better risk-reward currently. Investors having an investment horizon of 6-12 months can look at the money market funds as yields are pretty attractive in the 1yr segment of the curve.
We expect the benchmark 10-year Bond yield to gradually drift lower towards 6.50% by Q4 FY2025.
The bond markets, going into the policy, were expecting a status quo on the policy rates but were divided on change in the monetary stance. Thus the change in the monetary stance was welcomed by the markets and the benchmark 10yr bond yield touched an intraday low of 6.73% before profit booking took place and the 10yr benchmark ended the day at 6.77%. The current geopolitical situation and the recalibration of expected rate cuts in US following continuous strong economic data had led domestic yields higher over the course of last one week and the 10yr bond yield had touched a high of 6.85% at the beginning of this week.
Parijat Agrawal, Head of Fixed Income at Union Asset Management Company Private Limited: The moderation in growth and the persistence of headline inflation are concerning factors that may necessitate timely policy support. Addressing the challenge of stimulating growth is critical and should not be overlooked. Core inflation has consistently remained below the 4% target for nearly a year. We anticipate a 25 basis points rate reduction in the upcoming February policy.
Bajaj Broking Research Team: The RBI’s decision to retain the repo rate at 6.5% was widely expected and reflects a prudent, balanced approach to managing growth while keeping inflation within the tolerable range. The reduction of the Cash Reserve Ratio (CRR) by 50 basis points is an encouraging move, as it will inject significant liquidity into the banking system, enhance banks’ lending capacity, and improve credit accessibility for individuals. Markets had already anticipated today’s policy to be neutral, with a positive sentiment reflected yesterday.
V. P. Nandakumar, MD & CEO at Manappuram Finance: Though not surprisingly the MPC has decided to keep the repo rate unchanged, it has effectively signalled a pivot to policy easing by cutting the CRR to 4%. This is not only positive for the banking sector as their profits on M-T-M portfolio will improve significantly, it will also support the broader economy by ensuring adequate system liquidity which will see money market interest rates evolving in an orderly fashion. By doing so, the MPC has done a fine balancing act by supporting growth without lowering its inflation vigil.
Vaidyanathan Srinivasan, Operating Partner – Essar Capital: The Monetary Policy Committee’s widely anticipated decision to keep interest rates unchanged is a prudent and measured step. This along with a neutral monetary stance sends a strong signal of economic stability, which is vital for core sectors of the country.
This move supports steady financing conditions, enabling businesses to focus on executing large-scale infrastructure projects and advancing renewable energy investments. Predictable borrowing costs are essential for fostering growth and innovation in these capital-intensive sectors. As India continues to push for sustainable development and improved infrastructure, the RBI’s policy ensures that the momentum in these sectors remains uninterrupted, contributing significantly to the nation’s long-term economic goals.
Dhanpat Nahata, Managing Partner – Essar Capital: The RBI’s decision to maintain the repo rate at 6.5% for the 11th consecutive time and reduce the Cash Reserve Ratio (CRR) from 4.5% to 4% is a timely and strategic move. Amidst heightened global uncertainties, rising energy costs, and fluctuating commodity markets, this monetary policy stance ensures financial stability and enhances domestic liquidity. The reduction in CRR might inject additional funds into the banking system, encouraging banks to lend more to corporates, particularly in critical sectors such as energy and infrastructure.”
