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Navigating India’s Economy: Insights from the RBI Monetary Policy

The RBI Monetary Policy is a framework implemented by the Reserve Bank of India to manage the country’s money supply, control inflation, and stabilize the economy. Through tools such as interest rate adjustments, reserve requirements, and open market operations, the RBI aims to ensure price stability, encourage economic growth, and maintain liquidity in the financial system. This policy directly impacts sectors like banking, investments, consumer spending, and borrowing, influencing both the short-term and long-term trajectory of India’s economy, please find insights from industry experts below:

Ramesh Menon, Founder Director, Delhi Consortiums
With stable borrowing costs, home loans are becoming more affordable, which is likely to increase demand in the housing market, particularly during the upcoming festive season. This stability will enable developers to plan their projects with confidence, as financing conditions are expected to remain favourable.
However, delays in the rollout of the Master Plan for Development (MPD) 2041 have hindered the timely execution of key infrastructure and housing projects. There is substantial private capital awaiting in the wings for deployment into Delhi Greenfield projects under land pooling and low density residential areas. Formal gazette notification of MPD2041 would unlock the value of land exceeding 1.00 lakh crores. Delhi supply would also soften the prices in the overheated markets of Gurgaon and a supply surge of affordable residential in Delhi.

Mr. Deepak Ramaraju, Senior Fund Manager, Shriram AMC.
“ As expected, the RBI left the repo rate unchanged at 6.5%. The RBI stance has changed to neutral, indicating that its primary focus is to balance growth and inflation. Growth has been resilient and given the short-term pressure on inflation, RBI may continue to hold interest rates unchanged in Q3 FY 2025 and based on inflation moderating below 4.5% and moderation of geo-political concerns, the RBI may undertake a rate cut decision in Q4 FY 2025.

The bond and equity markets are expected to react positively in the medium term. Though short-term biases of FII may continue towards Chinese markets keeping pressure on the equity markets, the resilient domestic flows can defy deep corrections in the equity markets despite high valuations. The markets may trend positive with subsequent rate cuts by the US Fed. However, stock-specific corrections can be expected based on the earnings performance. Overall, in the short term, one can expect a buy-on-dip approach with a neutral stance by RBI.”

Mr. Venkatraman Venkateswaran – Group President & CFO, Federal Bank
RBI maintained the Repo rate at same levels and changed the stance to Neutral, which was largely in line with consensus. The balance between growth and inflation is well poised and was the cue for stance change. RBI maintained the GDP growth at 7.2% and reiterated the focus to tame inflation, largely Food inflation.

Few measures to further ease impact on customers was announced re: foreclosure charges and increase in per transaction limit for UPI / UPI Lite wallet is a welcome move.

Barring any major upheaval in geo-politics and other external factors, we may see the first action on Repo rate in Dec MPC meeting. Near term data points will form the basis for rate cut.

Mr. Vijay Kuppa – CEO, InCred Money
The Monetary Policy Committee (MPC) has kept the repo rate unchanged at 6.5%, a decision aligned with expectations. The RBI’s focus remains clear—steering the economy toward a durable alignment of inflation with its target amidst geopolitical tensions and stabilizing domestic inflationary pressures. Given the current macroeconomic environment, further rate cuts in the upcoming quarters seem unlikely.

Despite global economic uncertainties, India stands in a relatively stronger position, with real GDP growth for 2024-25 projected at a robust 7.2%. The RBI’s decision signals flexibility, which is crucial as global commodity prices, including crude oil and metals, witness volatility. This balanced approach ensures sustained economic growth without the risk of overheating.

With deposit rates at elevated levels, this presents an ideal opportunity for locking in high-yield fixed deposits. At the same time, high borrowing costs make a compelling case for increasing debt allocations in investment portfolios, offering a buffer against potential equity market corrections which might occur due to geopolitical tensions.

Saurav Ghosh, Co-founder, Jiraaf
“Clearly the Monetary Policy Committee is cautious about its movement. The current inflation drop is being attributed to positive base effects. Therefore, the RBI seems to be taking a wait-and-watch approach to carefully monitor the trajectory of inflation and then move the needle in the right direction. It’s likely that before the next financial year, the RBI will decide to cut the interest rates.”

Nikunj Agarwal, CFO and Head of Lending Alliance, Propelld
“The RBI’s decision to hold the repo rate at 6.5% and shift to a neutral stance brings stability to the lending sector. With no immediate hikes in lending costs, institutions can continue providing affordable loans. This also offers directional optimism for a potential rate reduction regime in the near future. However, the neutral outlook signals cautious monitoring of inflation, which could influence future rates, making this period crucial for expanding access to credit while watching economic trends closely.”

Mr. Manish Jain, Managing Director at Bajaj Broking
“Looking at the current geo-political scenario, RBI had a little choice but to remain focused on inflation and balance growth at the same time. By keeping the repo rates unchanged and shifting from ‘accommodation’ to ‘neutral’, the MPC has taken a very calculated stance and is being watchful. The rural demand is trending upwards while urban demand continues to hold. Investment activity remains buoyant with government capex rebounding, which provides a breather.”

Rahul Jain – CFO, NTT DATA Payment Services India
“Increase in per transaction limit to Rs 10,000 from Rs 5,000 under UPI 123 and enhanced limits in UPI Lite is a big positive. Under-served categories such as senior citizens, and users from rural India with limited usage of digital means may find this beneficial. Enhanced limits can be particularly useful to make utility bill payments and for payments to other users.

This welcome move from the RBI comes after the SEBI’s directive to allow UPI based block mechanism for funding secondary market trades in the capital market. Overall, the use-cases for UPI are increasing. This augurs well for both the consumer as well as for the industry, as payments become more efficient and convenient.”

Mr. Arjun Naik, CEO of Scandron
“Today’s decision by the Reserve Bank of India underscores the resilience of India’s economic framework. By maintaining the repo rate, the RBI signals stability, which is crucial for industries like ours that rely on steady growth conditions. At Scandron, we are confident that this policy will bolster innovation and create a favourable environment for technology-driven companies like ours to scale.

As a leader in drone technology, we believe this stability will enable us to further drive advancements that support critical sectors such as agriculture, infrastructure, and national security. We remain committed to leveraging our expertise to develop cutting-edge solutions that contribute to India’s growth story, while fostering job creation and technological leadership.”

 

Sandeep Indurkar, CEO – Payments Vertical, BharatPe
“The RBI’s move to raise the UPI Lite balance limit to ₹5,000 and the per-transaction limit to ₹1,000 significantly expands its use for small-value transactions. Combined with the earlier launch of auto top-up for UPI lite feature, UPI Lite is becoming even more convenient for everyday payments. However, making it interoperable across apps would further streamline the user experience.”

Sandeep Yadav, Head – Fixed Income, DSP Mutual Fund
We expected the stance to changed in this MPC, so we are not surprised. Global yields and central banks will continue to weigh on RBI, especially since our macro parameters are somewhere in the middle and do not merit immediate action.

We believe rate cuts would occur soon, but will not hazard guess a timeline. If US data weakens, and central banks across world continue the rate cut trajectory then RBI has no reason not to cut rates.

If globally data strengthens and central banks move to “wait and watch”, our rate cuts are likely to be delayed.

We remain long on bonds.