RBI takes a holistic approach to target market microstructure: Expert

The intent to reward well-rated NBFCs would optimise their funding costs, but the larger picture lies in the freeing of capital for the banks

The RBI’s decision to cut rates was a recognition of benign inflation numbers and growth slowdown pangs. However, the bouquet of policy announcements on developmental and regulatory front underlines the RBI’s attempt to further fine-tune the linkage of monetary policy and market microstructure.

Following the Budget, there have been apprehensions of a fiscal policy obfuscating a possible rate cut. I would like to highlight that a recent RBI paper on emerging market economies (EMEs) found that the observed slump in growth in the post-crisis period would have been much sharper in the absence of fiscal measures, implying that fiscal activism pursued