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RBI Holds Rates at 5.25% to Fuel Growth, Ensure Stability: Economists

Economists and bankers have largely welcomed the Reserve Bank of India's decision to maintain the repo rate at 5.25%. They state the move provides stability for the financial system and supports credit growth, particularly for retail and MSME segments. The pause reflects a balanced, safety-first approach that prioritizes controlling inflation while fostering economic recovery. The unchanged rate regime is also seen as positive for preserving affordability in the housing market.

Key Points: RBI Keeps Repo Rate Unchanged at 5.25%: Economists React

  • Supports ongoing economic recovery
  • Ensures stable credit growth
  • Prioritizes macroeconomic stability
  • Preserves homebuyer affordability
2 min read

RBI MPC rate decision to support credit growth, recovery, financial stability: Economists

Economists say RBI's rate pause supports credit growth, economic recovery, and financial stability while balancing inflation control.

"The decision... signals the RBI's continued effort to balance growth with inflation control - Srinivasan Vaidyanathan"

New Delhi, April 8

The Reserve Bank of India's decision to keep the repo rate unchanged at 5.25 per cent will ensure sustainability of the ongoing recovery, ensure credit growth and keep borrowing costs stable, economists and bankers said on Wednesday.

The central bank's decision reflects a balanced and 'safety-first' approach, prioritising macroeconomic stability, said Ajay Kumar Srivastava, Managing Director & CEO, Indian Overseas Bank, also lauding RBI's continued focus on improving ease of doing business, especially for MSMEs.

The removal of due diligence requirements for onboarding onto the TReDS platform is a progressive step that will significantly enhance liquidity access and working capital efficiency for small businesses, he added.

The status quo factors in rising upside risks to inflation and provides much-needed stability to the financial system," Vinod Francis, SGM & Chief Financial Officer, South Indian Bank.

A steady rate environment, supported by adequate liquidity, should continue to support credit growth across retail and MSME segments, while also strengthening asset-liability management for lenders, he added.

"The decision to maintain the status quo on rates was largely in line with expectations and signals the RBI's continued effort to balance growth with inflation control," said Srinivasan Vaidyanathan, Operating Partner - Essar Capital.

"With the central bank also focused on preventing excessive weakness in the rupee amid global volatility, the move highlights a preference for macroeconomic stability and regulated policy action. While the pause may delay immediate relief on borrowing costs, policy consistency at this stage provides businesses and investors with greater visibility and confidence for long-term planning," he added.

Tribhuwan Adhikari, MD & CEO of LIC Housing Finance found the unchanged rate regime positive as it preserved affordability for homebuyers, especially in the affordable and mid-income segments.

Dipti Deshpande, Principal Economist, Crisil Ltd, on today's monetary policy, said that fiscal space to absorb part of the higher energy costs from the conflict has contained their impact on retail inflation so far.

Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA Limited said that crude and product flows may take months to normalize even after cease fire, but some supplies would start for crude oil and petroleum products like naphtha, LPG, thereby alleviating the immediate shortage.

- IANS

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Reader Comments

P
Priya S
Good move for MSMEs! The focus on easing business for small enterprises is crucial. They are the backbone of job creation. Hope the TReDS platform changes really improve cash flow for small business owners.
R
Rohit P
While stability is good, I respectfully disagree that this is the best for growth. Inflation is still biting the common man hard. Vegetables, fuel, everything is so expensive. A slightly more aggressive stance on controlling price rise would have been welcome.
S
Sarah B
The RBI's 'safety-first' approach makes perfect sense given the global volatility. Protecting the rupee and ensuring financial system stability should be the priority right now. Long-term planning confidence for investors is key.
K
Karthik V
As someone in the housing sector, this is positive news. Affordability in the mid-income segment must be preserved. A stable repo rate means banks won't suddenly hike home loan rates, giving potential buyers some breathing room.
D
Dipti Deshpande
The mention of fiscal space absorbing energy costs is an important point. It shows the government and RBI are working in tandem. Let's hope the global crude situation eases soon, otherwise this pause might not last long.

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