|
RBI expected to cut policy rates by 50 basis points in the first half of 2025
The Reserve Bank of India (RBI) is expected to cut policy rates by 50 basis points in the first half of 2025 after easing liquidity and reducing the Cash Reserve Ratio (CRR). While the rate cuts may support growth, they could temporarily compress banks' Net Interest Margins (NIMs) and impact asset quality, especially for public sector banks and smaller lenders.
The Reserve Bank of India (RBI) is likely to cut policy rates by 50 basis points (bps) in the first half of 2025, says a report by Jefferies.
This after the central bank eased its stance on liquidity and reduced the Cash Reserve Ratio (CRR) by 50 bps during the last MPC meeting.
Jefferies report says "After easing stance on liquidity & CRR by 50bps, RBI may review policy rates; we see 50bps rate cuts in 1H25".
The report highlighted that the RBI's shift from a "withdrawal" stance to a more "neutral" liquidity position, coupled with the CRR cut to the pre-COVID level of 4 per cent of Net Demand and Time Liabilities (NDTL), has set the stage for a potential rate cut.
This reduction in policy rates is expected to stabilize the regulatory momentum, which may be supportive of growth and investments in the near term.
|
