The banking pack sulked in trade after the Reserve Bank of India’s latest monetary policy measures did not contain further liquidity easing measures. While the central bank undertook the first rate cut in almost five years, trimming the benchmark lending rate by 25 basis points to 6.25 percent, it failed to bring cheer to the equity markets, which already priced in the development.
In the previous MPC meeting on December 6, 2024, then-RBI Guv Shaktikanta Das announced that the central bank was trimming the CRR or Cash Reserve Ratio by 50 basis points to 4 percent. This is the amount of a bank’s total deposits maintained with the RBI as a reserve. Therefore, banks would have more cash freed up, injecting liquidity into the system.
Following this, the RBI imposed a series of measures to boost liquidity in January, adding Rs 1.5 lakh crore to the system.
Therefore, investors were looking to the Reserve Bank of India for measures beyond the expected quarter-sized cut in the repo rate for the current meeting. Analysts had expected that easing by stealth via unconventional policy tools like liquidity and regulatory measures will continue.
