Rate cuts to continue

Further rate cuts are contingent on the non-banking financial company sector recovery prospect

We are not surprised by the Reserve Bank of India’s (RBI’s) decision to cut the repo rate by 35 basis points (bps). In fact, we wrote about this possibility in a recent report (Get ready for a potential 35-bps repo rate cut, August 1).

We think the monetary policy committee will cut repo rate by another 40 bps in the rest of 2019-20 (FY20). After having delivered four back-to-back rate cuts, we expect the RBI to pause in the October 4 policy (or just deliver a 15-bps rate cut), but we see the central bank delivering a 25-bps rate cut in