Ajit Ranade: India’s stubbornly high PF payout rate is getting in the way of its monetary policy
In 2025, the Reserve Bank of India (RBI) cut its benchmark repo rate four times by a cumulative 125 basis points from 6.5% to 5.25%, the most aggressive easing cycle since 2019. Consumer price inflation fell to 1.33% in December. The logic of lower rates was clear: reduce the cost of capital and let monetary easing reach businesses, borrowers and consumers. Monetary transmission, however, requires the entire interest rate architecture to move together; it isn’t.
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