By holding the repo rate for the second consecutive time since its cut in October last year, the RBI has not sprung any surprise. With inflation on the rise, the central bank had little leeway to reduce its policy rate.
That said, the RBI bank has, through a series of liquidity and regulatory tweaks (explained in Banking page - pg 5), opened up the possibility of fall in lending rates in certain segments such as auto, home and MSME loans. Also, by implementing the longterm repo of one- and three-year tenors, the RBI will make longterm funding available to banks at much cheaper rates. This will lower cost of funds and trigger further lending rate cuts.
Better transmission
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