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This refers to ‘Signs of more monetary easing’ (April 10). The lowering of the repo rate by 25 basis points and keeping an accommodative stance by the Monetary Policy Committee is critical at a time when the economy needs investments and faces challenges from Trump’s tariff hikes.
Lowering the lending rates in sync with the repo rate will shrink the net interest margins, and to address the stress, banks need to have adequate liquidity to simultaneously enforce the cut in deposit rates too.
Banks have to shed their dependency on Certificates of Deposits and other costly deposits and mobilise cheaper deposits for deploying at lower rates. Transmission of the change in repo rate is pivotal to ensure the desired impact on the growth of investments.
Therefore RBI must ensure that the Financial intermediaries act swiftly and transmission of changes in repo rate is effected.
With inflation within RBI’s range, more repo cuts would be essential for which banks must have liquidity and possess better quality assets.
VSK Pillai
Changanacherry
Apropos the Editorial ‘Right response’ (April 10), amidst the tariff war, melting stock indices and global financial and economic turmoil, the first MPC meeting in FY26 assumed greater significance.
The rate cut of 0.25 would bring down the lending rate and spur credit demand.
The government’s challenge is to revive FDI inflows. The only solace we have in the event of sanctions on Russia is the comfortable price of Brent crude oil hovering around $60 per barrel which can be well encashed to meet the needs of oil imports.
Passing through the tariff cloud storms is a real challenge now.
RV Baskaran
Chennai
RBI Governor Sanjay Malhotra, in his interview (April 10), has said that the central bank is concerned more about the US tariff impact on India’s growth rather than inflation.
But then, one of the main objectives of monetary policy is to achieve economic growth with stability.
There is no point in achieving high growth with inflation.
S Ramakrishnasayee
Chennai
Published on April 10, 2025
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