The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, has kept the repo rate unchanged at 6.5 per cent for the eleventh consecutive time today, December 6. This meets the expectations of economists by keeping the key policy rates unchanged. 

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Simultaneously, the MPC reduced the cash reserve ratio (CRR) by 50 basis points (bps) to stimulate economic activity, with the reduction divided into two tranches of 25 bps each on December 14 and 28. 

Here is the list of reactions of economists and market experts on the RBI's decision repo rate at 6.5 per cent and a 50 bps cut on the Cash Reserve Ratio (CRR):

Dr. Manoranjan Sharma of Infomerics Ratings

"The MPC has taken the right call and is entirely in line with our expectations. The RBI has kept the repo unchanged at 6.5 % since February 2023, and given the macroeconomic landscape, this is not the right time to tweak this rate," Sharma said.

"There was a strong case for a CRR cut to ease liquidity without spiking inflation. This would also provide banks with additional resources to support credit growth and strengthen financial stability. The decelerating growth would induce a cut in the RBI’s growth projections for FY25- the RBI cut the growth forecast to 6.6 per cent from the earlier 7.2 per cent. We also anticipated that the neutral stance would continue," he added.

According to Manoranjan Sharma, the cash reserve ratio (CRR) for all banks will be reduced to 4 per cent of net demand and time liabilities (NDTL) in two tranches of 25 basis points each, effective from 14 and 28 December. "This measure will infuse Rs 1.15 lakh crore of liquidity into the banking system, which will, therefore, provide a fillip to the credit process and also give an impetus to GDP growth. With the RBI keeping the Repo rate steady at 6.5 per cent, all external benchmark lending rates (EBLR) linked to the Repo rate will not increase. Hence, the borrowers' equated monthly instalments (EMIs) will not rise, Sharma said.

Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services

"Monetary policy has delivered exactly what the economy and markets need in the present context. RBI Governor’s emphasis on price stability is appropriate given the elevated level of inflation," Geojit Financial's economist says.

"The decision to cut the CRR by 50bp facilitating injection of Rs 1.16 trillion of liquidity into the system will ease the liquidity constraints and more importantly reduce the banks’ cost of funds. From the market perspective, this is an excellent policy response. Banking stocks will remain resilient," Vijayakumar added.

Anitha Rangan, Economist at Equirus

According to Anitha Rangan, Economist at Equirus, this move provides adequate liquidity and eases short-term borrowing while maintaining long-term stability.

Rangan noted that external factors take precedence, and the RBI is unlikely to adjust policy rates until there's clarity on global economic conditions. The reversal of the 50 bp CRR hike from April 2022 is a positive step, but policy hikes from May 2022 will take longer to reverse. The economist advises expecting no more than a 50 bp rate cut in 2025 and emphasizes the need for caution and patience amidst external sector uncertainty.

Doing these two-measure RBI has provided adequate liquidity and eased the short-term borrowing while keeping longer-term well anchored. Alongside the growth outlook of 7.2 per cent for FY25 has been taken down to 6.6 per cent, with the recent slowdown in growth. The inflation outlook has however been revised upwards to 4.8 per cent for FY25 from 4.5 per cent with 4 per cent reaching in Q2 of FY26.