The rate cut will be beneficial for real estate sector, to make borrowings more affordable

RBI Likely to Cut Repo Rate by 25 Basis Points

The Reserve Bank of India (RBI), in all likelihood, is set to cut the repo rate by 25 basis points for the first time in almost five years, aligning with the Budget's objectives of stimulating economic activity while managing a prudent fiscal position, which provides comfort on currency and inflation fronts, industry experts said on Wednesday.&nbsp;
The central bank last reduced the repo rate by 40 basis points to 4% in May 2020, to help the economy tide over the crisis following the Covid-19 pandemic. Currently, the repo rate stands at 6.50%.&nbsp;
Given the Union Budget's emphasis on reviving consumption to support economic growth, the RBI might consider turning the policy rate cycle.&nbsp;
Additionally, the government's balanced borrowing plan and efforts to enhance liquidity could support a favourable environment for such a rate cut, said Shishir Baijal, Chairman and Managing Director, Knight Frank India.
A rate cut will be beneficial for the real estate sector as it will make borrowings more affordable for home buyers and reinstate consumer sentiment, particularly in the lower and mid-income segments.
It will also potentially enhance liquidity in the banking system making it easier for developers to access financing for their projects.&nbsp;
According to Bajaj Broking Research, the potential rate cut is coming after the domestic rate-setting panel has kept the policy repo rate unchanged for the last 11 consecutive meetings&mdash;after raising it by 250 bps between May 2022 and February 2023.&nbsp;
The Union Budget prioritises consumption and fiscal discipline, leaving room for the central bank to stimulate growth. With GDP growth slowing to a seven-quarter low of 5.4% in Q2 FY25, a rate cut seems imminent, said the report.
RBI's recent liquidity measures aim to stabilise the financial system, reinforcing expectations of monetary easing.
The central bank&rsquo;s MPC shifted to a neutral stance in October last year, providing flexibility in policy decisions. Economists expect no change in this stance in February, with a shallow rate cut cycle anticipated.
"While the RBI ensures sufficient liquidity, a CRR cut is unlikely in the next policy announcement, as the central bank maintains a supportive financial environment," the report mentioned.
&mdash;IANS

5 ફેબ્રુઆરી, 2025 | 17:23 IST

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