Faced with slowing GDP growth and encouraged by benign inflationary trends, the Reserve Bank of India (RBI) has delivered a Goldilocks cut of 35 basis points in the benchmark repo rate. Though a rate cut was a foregone conclusion ahead of the monetary policy announcement, the expectation was of either a 25 or 50 basis points one. Given the extent of the slowdown in the economy, the Monetary Policy Committee (MPC) deemed the former as too low but taking into account factors such as the turbulence in the global financial markets and the rupee’s fall in the last few days, the latter was seen as too high. In the event, the MPC settled on a median and unconventional 35 basis point cut, which keeps the powder dry for further cuts this financial year. With this, the RBI has cut rates in four consecutive policy announcements beginning February this year, aggregating to a total of 110 basis points. But the transmission by banks to lenders has not been even a third of this. The central bank says that banks have passed on just 29 basis points which is poor indeed. One factor inhibiting transmission was the tight liquidity conditions until June when the RBI flooded the market — in fact, the last two months the central bank has had to absorb excess liquidity floating around. There is, therefore, reason to hope that transmission from hereon would be quicker. The repo rate at 5.40% is now at a nine-year low and is headed lower in the next few months and could well settle at 5% or very close to that by the time this rate cutting cycle plays out. Supporting this theory is the fact that inflation is projected to be benign for the next one year. Growth, on the other hand,