RBI Monetary Policy Review – Status Quo On Rates, Change In Stance: Axis Securities

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Axis Securities Report

The ‘status quo’ on policy rates and change in stance from ‘Withdrawal of Accommodation’ to ‘Neutral’ was on expected lines. This has set the stage for a rate cut and we expect a rate cut announcement in the Feb’25 meeting.

The regulator has maintained its growth and inflation forecast for FY25 with a few minor tweaks. While growth in Q1 FY26 is expected to hold up well, inflation is expected to continue to hover over the targeted mark of 4%.

Given the increasing anticipation of a rate cut in the upcoming meetings, margin pressures could act as a dampener for sector RoAs.

While banks with higher share of external benchmark lending rate loans could face higher pressure of NIM contraction, banks with higher share of marginal cost of fund based lending rate linked loans/fixed rate loans remain better placed to navigate the rate cut cycle.

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