Reserve Bank of India’s Monetary Policy Committee (MPC) will begin its 3-day meeting today on the repo rate cut. Chaired by RBI Governor Sanjay Malhotra, the committee’s decision will be announced on Aug 6. According to a report by the State Bank of India, the RBI may announce a 25 basis points repo rate cut in its monetary policy review to boost credit growth ahead of Diwali. The SBI report said that a front-loaded rate cut on Aug 6 can bring an ‘early Diwali’ by boosting credit growth.
The report said, the past data show a clear trend that any repo rate cut ahead of Diwali results in higher credit growth during the festive period. It added that Diwali, being one of the biggest festivals in India, sees higher consumer spending, and a low-interest rate environment before Diwali helps boost credit growth. However, some economists believe that the Central Bank is likely to maintain the repo rate at 5.5 percent, following three consecutive rate cuts totalling 100 basis points.
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