The Reserve Bank of India (RBI) is unlikely to announce a rate cut in its upcoming monetary policy meeting, a State Bank of India (SBI) report said. The report highlighted that India’s strong, above-capacity economic growth strongly supports the case for maintaining current interest rates, as reported y the news agency ANI.
Focus on free thinking
The SBI report suggested that the RBI may not align its interest rate decisions with the growth in the US. Instead, it is likely to take an independent stance that prioritises changing domestic economic conditions over global influences. "Domestic conditions are paramount and with robust growth higher than potential output, case of pause exists," the report said.
"RBI may disassociate from the interest rate developments in the US and may take independent view on the domestic rates based on evolving conditions" the report added.
Effect of credit growth on deposits
Furthermore, the report highlighted the critical relationship between credit and deposits in the Indian banking system. It warned that a decline in loan demand could lead to a decline in savings, making it necessary for credit growth to remain robust to maintain savings levels. Vibrant investment is important, as it creates demand for loans and in turn supports investment growth.
Rates are expected to remain stable
While some analysts have predicted a possible rate cut due to global growth, the SBI report suggested that continued domestic growth and strong loan demand could force the RBI to continue to cut rates on the snow in a short time. The main focus of the RBI seems to be to maintain the growth of the Indian economy and reduce the impact of external factors.
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