The Report on RBI’s Jun’25 Policy decodes the significant policy action undertaken. It posits the oversized rate cut as a clear shift in focus from inflation to growth. The note presents the revised view of SBICAPS in line with evolved circumstances since last policy. On growth, domestic fundamentals look strong but there could be threats emanating from global glum. While the large rate cut is positive, change in stance to “Neutral” indicates an early end to the rate cut cycle, which has dampened some of the enthusiasm. Further modulating the complex policy decision is a cut in the CRR which is set to ensue from Sep’25. These, along with measures already in place for liquidity, will keep the banking system amply lubricated. Finally, yields have come down sharply in CY25, but we may be near a trough. Transmission to lending and deposit rates is expected to be quick given quantum of cut and exceptional liquidity available.
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