Rate cut a palliative measure; cannot counter coronavirus pandemic impact

Lowering rates at this time also carry the risk of affecting deposits, as banks will have to rework their deposit rates considering that the lending rates have already been affected.

The Reserve Bank of India’s (RBI’s) decision not to lower the repo rate was in a way expected; and it would be interesting to see how the market reacts. Post the US Federal Reserve (US Fed) lowering rates, it was widely debated whether the RBI would lower rates before the next policy or wait for the formal occasion.

It may be pointed out that the decision of the US Fed to lower rates in the first phase did not quite move the markets. The latest move to bring the rate down to 0 – 0.25 per cent with a quantitative