No rate cut, but RBI steps up to lift credit, buoy biz

Hint of December rate cut after two pauses; multiple measures to ease credit flow

- Anshika Kayastha [e-mail]

The central bank unwrapped a box of goodies to power credit and business on Wednesday, even as it delivered a better growth outlook and kept policy rates untouched.

The Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.5% for the second time in a row, while nudging up the GDP estimate for the year from 6.5% to 6.8%, citing the economy's resilience in the face of turbulence. The policy panel now sees inflation this year at 2.6% as against 3.1% earlier, thanks to the recent big-bang cuts in goods and services tax (GST).

The Reserve Bank of India governor Sanjay Malhotra hinted at the possibility of another rate cut in December, saying that falling inflation has "created space for a rate cut". The RBI has cut the policy repo rate by a total of 100 bps between February and June.

The Reserve Bank of India (RBI) also floated a series of measures for better banking competitiveness, credit flow, ease of doing business, foreign exchange management, consumer satisfaction, and internationalization of the rupee.

The biggest relief for banks, especially the private ones, was the decision to drop an October 2024 plan that would have restricted them from having overlapping businesses with group companies. Potential beneficiaries include HDFC Bank, Axis Bank and ICICI Bank, who have non-bank subsidiaries and would have been forced to absorb or get rid of them. The BSE Bankex closed 1.44% higher on Wednesday, against the benchmark Sensex's 0.89% increase.