The Reserve Bank of India (RBI) kept its key interest rate unchanged on Friday but cut the cash reserve ratio (CRR) that banks are required to hold, effectively easing monetary conditions as economic growth slows.

The Monetary Policy Committee (MPC), which consists of three RBI and three external members, kept the repo rate unchanged at 6.50% for an eleventh straight policy meeting.

The CRR was cut by 50 basis points to 4%, effective in two tranches on Dec.14 and Dec. 28.

The country's GDP growth rate fell to 5.4% in the July-September quarter, its slowest pace in seven quarters, while inflationary pressures are on the rise again and the rupee is under pressure, limiting the RBI's room to manoeuvre.

COMMENTARY

ADITI GUPTA, ECONOMIST, BANK OF BARODA, MUMBAI

"RBI's rate decision was in line with our expectations. While noting risks to the growth outlook, the Governor stressed on the need of maintaining a favourable inflation and growth balance."

"With inflation expected to moderate in the coming months, we believe that a rate cut in February 2025 looks most likely."

SHISHIR BAIJAL, CHAIRMAN AND MANAGING DIRECTOR, KNIGHT FRANK INDIA, MUMBAI

"The continued shift towards a neutral stance suggests that the central bank's focus is gradually moving from inflation control to supporting growth."

"At this point, a rate cut would be more beneficial for consumers, including home buyers, as borrowing costs remain high despite the unchanged repo rate. The growth in home loans has slowed, and consumption among lower-income groups has significantly decreased, as witnessed in sharp moderation in sales of affordable housing."

DEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS AND RESEARCH, GURUGRAM

"The growth outlook has weakened since the last quarter, both domestic and global factors have contributed towards weak growth outlook. Inflation is the biggest risk for any economy and financial and growth stability can be achieved only when inflation is under control."

"The CRR cut to augment liquidity is likely to impact the market interest rate. The February 2025 rate cut is still not certain, it will dependent on data."

(Reporting by Dhanya Skariachan, Dimpal Gulwani, Hritam Mukherjee and Yagnoesni Das in Bangalore, Siddhi Nayak in Mumbai; Compiled by Indranil Sarkar; Editing by Sumana Nandy)