The net effect of RBI’s moves is lower costs for banks

The gloomy view the market has taken of the RBI’s latest monetary policy review seems overdone. The reaction was more due to the build up of expectations in the run up to the review. The net effect of RBI Governor Raghuram Rajan’s decision to slash the Marginal Standing Facility (MSF) rate and hike the repo rate is to immediately reduce the cost of funds for banks.

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