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In the next RBI Monetary Policy meeting which is on 6th August it is expected that Repo Rate will be cut by 25-35 bps which should be cut by only 15-20 bps & Reverse Repo should be cut by 25-35 bps.
The main reason behind more Reverse Repo cut for this time will be the Banks which have got more liquidity approximately 10 Lakh Cr. that liquidity should not be again parked at RBI. Also more Reverse Repo cut will make Banks easy for lending in the markets.
But this time RBI should do something different like instead of cutting Repo or Reverse Repo, RBI should cut Standing Deposit Facility. Also the Banks which park money on Reverse Repo Window should not be given any intrest and should be penalised.
This drastic step of not cutting Repo or Reverse Repo will help to manage liquidity & will be align in credit growth. Because the reason of cutting Repo & Reverse Repo is to increase credit growth and if it is not increasing then there is no need to cut it.
If this out of the box steps are taken by RBI on 6th August then we might see a different stance & credit growth will increase in India
#RBI #MonetaryPolicy #Creditgrowth
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