On a day when RBI left policy rates unchanged, Moody's Investors Service has said the transmission of interest rate cuts will effect India's economic development and credit profile.
It said there could be some short-lived spikes in inflation, driven by food prices.
Moody's Investors Service SVP ( Sovereign Risk Group ) Marie Diron said, “looking forward, we do not expect a significant change in the monetary policy stance. Rather, the transmission of monetary policy will influence India's economic development and credit profile."
Central bank on Tuesday maintained status quo on interest rate, while pegging economic growth at 7.6 per cent and retail inflation target at 5 per cent for January 2017.
Moody's said transmission of monetary policy will rest on on progress in the clean-up of banks' balance sheets.
It added that medium term, the bankruptcy law, if effectively implemented, is credit positive for banks and will help to ease monetary policy transmission to the real economy.