As India’s economy experiences robust growth, the Reserve Bank of India (RBI) is unlikely to implement rate cuts in its upcoming monetary policy meeting. Reveals SBI’s report on thursday.
As per SBI report, domestic economic conditions are a key factor in the central bank’s decision-making. With the country’s growth surpassing its potential long-term output, the RBI is expected to maintain the current interest rate levels rather than reduce them.
“Domestic conditions are paramount, and with robust growth higher than potential output, the case for pausing rate cuts is clear.” said SBI report.
Further, the report emphasized, that the RBI may not align its interest rate decisions with those of the United States.
Instead, it will likely adopt an independent approach, focusing on domestic economic trends. Although global economic developments, including U.S. interest rates, impact financial markets, the RBI is expected to prioritize local factors when determining its monetary policy.
“The RBI may distance itself from U.S. interest rate movements and will likely make independent decisions on domestic rates based on evolving local conditions.” said report.
Additionally, the report highlighted the significant link between credit and deposits in India’s banking system.
It also noted, that credit growth drives deposit growth, and any decrease in credit demand could eventually result in reduced deposits. This makes it crucial to maintain strong credit growth to support deposit levels.
But, despite global developments that might suggest rate cuts, the SBI report concludes that India’s robust domestic growth and the need for sustained credit expansion could lead the RBI to hold interest rates steady in the near future.
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(With Inputs From ANI)
