CRR cut, AI ethics push, and SORR benchmark: Experts hail RBI’s pragmatic policy moves

RBI governor Shaktikanta Das made the announcement on Friday.

This is the 11th consecutive time when the repo rate has been kept unchanged.

The RBI has kept the repo rate unchanged at 6.5% since February 2023, when it last increased the rate to its current level.

SBI Chairman CS Setty described the monetary policy announcements made today as “pragmatic, candid and has crossed important milestones in regulatory and development policy space”.

The cut in CRR by 50 bps, raising the FCNR (B) deposit rates, development of the Secured Overnight Rupee Rate (SORR) benchmark and revision in limit of collateralised agriculture loans are all positive for banks.

The decision to form a committee to investigate the issue of ethical AI in financial services and use of technology to detect mule accounts is timely, he added.

Bandhan Bank Chief Economist and Head of Research Siddhartha Sanyal said, “The CRR cut will inject large quantum of liquidity almost immediately. One feels going ahead, it might be important for RBI to continue monitoring banking system liquidity condition closely and continue to provide support for durable liquidity in order to support growth in credit to the productive sectors of the economy.

The revision in RBI’s growth and inflation forecasts are in line with expectations. The RBI reiterated their confidence about better growth momentum in the second half of the financial year. Importantly, the central bank continues to be more confident about stronger momentum in rural India.

V. P. Nandakumar, MD & CEO at Manappuram Finance noted, “Cutting the CRR to 4% is not only positive for the banking sector as their profits on M-T-M portfolio will improve significantly, it will also support the broader economy by ensuring adequate system liquidity which will see money market interest rates evolving in an orderly fashion.  By doing so, the MPC has done a fine balancing act by supporting growth without lowering its inflation vigil.”