RBI rate hike pulls markets lower
The Nifty 50 closed at 22,603.05, down 173 points or 0.76%, while the BSE Sensex settled at 72,638.70, a loss of 429 points or 0.59%
The Reserve Bank of India recently raised its repo rate by 25 basis points, marking the first increase since February 2023, in an effort to curb rising inflation. Reserve Bank Governor Sanjay Malhotra expressed confidence that despite the rate hike, bank credit growth would remain robust at around 19%, stating that a few percentage points would not significantly impact overall growth. The RBI also upgraded its FY27 economic growth forecast to 7.1%, citing strong consumer demand and investment.
Non-food bank lending expanded 18.8% year-on-year in the week leading up to August 31, compared to 10.2% in the previous year. Lending to the services sector surged 24.3%, driven by a rise in credit to non-banking finance companies, trade, professional services, and commercial real estate. Industrial credit grew 18.2%, up from 7% a year earlier.
RBI Deputy Governor S Janakiraman emphasized that any slowdown in credit growth should be viewed within the context of a longer-term trend, with an average of 12-14% over the past decade, which he deemed sustainable and supportive of growth. He added that it typically takes two quarters for the effects of rate changes to fully materialize, so a modest moderation in credit growth from 18-20% should still be adequate to support economic growth.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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- Credit growth may ease after rate hike but remain strong: RBI economictimes.indiatimes.com
