More loans for the indebted.

 "The Reserve Bank of India (RBI) cut its key repo rate by a larger-than-expected 50 basis points (bps) yesterday, a third consecutive reduction." "The Monetary Policy (MPC) cut the repo rate to 5.50%. It has now cut rates by 100 bps in 2025". ET. "In a major boost for the banking industry the RBI announced a phased 100 bps cut in the Cash Reserve Ratio (CRR)." "The CRR, the share of deposits that banks must hold with the RBI, will be reduced from 4% to 3% in four tranches of 25 bps each, beginning September 2025." ET. "The cut in CRR would release primary liquidity of about Rs 2.5 trillion into the banking system by the end of November," said RBI Governor Sanjay Malhotra. The CRR is a percentage of bank deposits maintained in cash form by banks with the RBI. It is compulsory and banks are not allowed to use the money for economic or commercial purposes. It allows the RBI to regulate money supply in the economy depending on the rate of inflation. DBS. The RBI hopes that the lower cost of borrowing will encourage companies to invest in new projects, thereby increasing jobs, and individuals will borrow to increase consumption. People borrow to buy houses and cars. The housing price index reached an all-time high at the end of 2023, dropped in early 2024 and has again reached record levels. A techie wrote on X that his friend is earning Rs 120,000 per month after taxes and deductions. He doesn't splurge and has no car or kids. Apartments start at Rs 25 million in Gurgaon and, if he buys one, he will have to live paycheck to paycheck. No vacations, no emergencies. HT. If such a person is tempted to buy an apartment by lower borrowing rates he will surely reduce other non-essential spending, thus reducing overall consumption. Companies will not invest unless consumption increases. The Forward-Looking Survey on Private Sector Capex Investment Intentions "projects intended private capex almost Rs 4.9 trillion this fiscal year, about a quarter less than last year's plans." Mint. Sale of small, entry-level cars, priced under Rs 500,000 has dropped from over one million a decade ago. "india's penetration of cars, as per a recent Moody's report, is just 44 per 1,000 people, while China's is above 250." Mint. Already, "India's middle class is sinking into a massive debt trap, and the numbers are getting worse." CEO at Marcellus Investments Saurabh Mukherjee said "millions of middle-class Indians have taken on multiple loans they may never be able to repay." BT. Cutting CRR will increase the amount of cash in banks and, since idle cash does not earn profits, banks may be tempted into subprime lending which is "the practice of extending credit to borrowers with low incomes or poor, incomplete, or nonexistent credit histories (Britannica). That will substantially increase the risk of non-performing assets. However, "RBI has acknowledged that government's ownership of public sector banks makes its risk management easier," "because the government behaves like a parent company with deep pockets." TOI. This means using taxpayer money for indiscriminate lending in an effort to prop up the GDP. Assam, West Bengal, Tamil Nadu and Kerala are to hold assembly elections in 2026. wikipedia. People are already deep in debt. Why entice them further? At what cost?