Reserve Bank Chief Shaktikanta Das
The Reserve Bank of India (RBI) announced on Friday a 0.5% reduction in the cash reserve ratio (CRR), lowering it from 4.5% to 4%. This move, aimed at boosting economic growth by increasing funds available for lending, marks the first CRR cut since March 2020. However, the central bank chose to keep the policy repo rate steady at 6.5% to address inflation concerns.
By cutting the CRR, banks will have an additional ₹1.16 lakh crore in the system, which is expected to lower market interest rates and encourage borrowing. The CRR represents the portion of bank deposits that must be held as reserves, effectively limiting how much can be lent out.
RBI Governor Shaktikanta Das shared that the monetary policy committee made this decision with a 4:2 majority after thoroughly assessing the overall economic landscape. The policy reflects a careful balance between supporting economic growth in a slowing economy and keeping inflation under control.
Reserve Bank Governor Shaktikanta Das expressed optimism about India’s economic path, stating, “India’s growth journey remains robust.” While inflation is on a downward trend, we must remain vigilant to significant risks that could arise. These risks cannot be underestimated.”
He highlighted a positive outlook, noting that the balance between inflation and growth is well-maintained. Das highlighted the stability of India’s external sector, noting that foreign exchange reserves have hit an all-time high.
The Governor assured that the RBI will adopt a flexible and proactive approach to managing the economy. He added that the recent monetary policy decision provides the monetary policy committee with the flexibility to adapt to the evolving economic landscape, ensuring it remains aligned with current challenges and opportunities.
Reserve Bank Governor Shaktikanta Das emphasized the need for price stability, noting its crucial role in maintaining people’s purchasing power. He emphasized that achieving “durable” price stability is essential for driving sustainable economic growth.
Das noted that policy intervention might be necessary if the slowdown in growth persists. However, he assured that the central bank currently views the economy as resilient. Despite recent fluctuations in growth and inflation, he remarked that domestic conditions remain well-balanced.
He also cautioned against complacency, especially given the uncertainties stemming from current geopolitical developments, which continue to affect global financial and commodity markets.
