RBI repo rate cut is like BrahMos and Akash activated together: CIO says Rs 2.5 lakh crore liquidity push feels like a missile strike

Time of India

13 hours ago

In a major policy move aimed at boosting liquidity and credit growth, the Reserve Bank of India (RBI) on Friday reduced the
Cash Reserve Ratio
(CRR) by 100 basis points to 3 per cent and cut the repo rate by 50 basis points to 5.5 per cent. Together, these measures are expected to release over Rs 2.5 lakh crore into the banking system. RBI Governor Sanjay Malhotra said the CRR cut will be implemented in four phases and will help reduce funding costs for banks.
RBI just activated BrahMos, Pinaka, and Akash together: CIO
The market responded to the scale and coordination of the RBI's announcement. 'The RBI just activated BrahMos, Pinaka, and Akash together,' wrote the CIO of Complete Circle Consultants on X, comparing the liquidity move and rate cut to a multi-pronged strike.
— PuneetSingh84 (@PuneetSingh84)
Analysts believe the CRR cut alone could ease funding conditions by releasing ₹2.5 lakh crore into the system. This is likely to lower banks' cost of funds, improve net interest margins, and support their profitability. The banking sector is expected to channel the additional liquidity into sectors such as housing, automobiles, and small business loans.
RBI announces staggered CRR cut to enhance liquidity
The RBI's CRR reduction, from 4% to 3%, allows banks to retain more of their deposits instead of maintaining them with the central bank. With this change, banks are required to hold ₹3 for every ₹100 in deposits, down from ₹4. This frees up ₹1 that can be used for lending or investment.
'The combined measures aim to boost lending and ease monetary conditions,' Malhotra said at the Monetary Policy Committee (MPC) briefing in Mumbai.
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Unlike a
repo rate cut
, which influences lending rates indirectly, the CRR reduction provides immediate liquidity support. The central bank plans to implement the CRR cut in four stages to ensure stability while increasing the money available to banks.
Repo rate cut to reduce borrowing costs
The 50 basis point repo rate cut directly lowers the cost of borrowing. This is expected to benefit home loan borrowers with lower EMIs or shorter loan terms. Personal and auto loans may also become cheaper, increasing consumer demand and pushing credit growth further.
By reducing the repo rate along with the CRR, the RBI has reinforced its support for economic expansion and recovery.
Policy transmission to get a boost
The CRR cut also improves monetary policy transmission. With additional liquidity, banks are more likely to pass on the benefits of the repo rate cut to borrowers. This is expected to make loans more affordable and stimulate economic activity.
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The RBI's dual move—cutting both the CRR and the repo rate—is viewed as a strong signal to the market that it remains focused on improving liquidity, encouraging credit offtake, and supporting broader growth.