Terming the Reserve Bank’s Friday monetary policy announcement as balanced, bankers said the gradual unwinding of liquidity measures will support growth while keeping inflation under control. The six-member monetary policy committee (MPC) kept the repo rate unchanged at 4 per cent and maintained an accommodative policy stance.
The RBI also suspended the G-Sec Acquisition Programme (G-SAP) and is proposed to undertake five 14-day variable rate reverse repo (VRRR) auctions on a fortnightly basis between today and December 3, 2021.
For the fiscal 2022, RBI retained its projection for real GDP growth at 9.5 per cent and has forecast CPI inflation at 5.3 per cent.
“As expected there is no change in policy rates. The gradual and calibrated unwinding of liquidity measures will support growth while keeping inflation under control,” Punjab National Bank Managing Director and CEO S S Mallikarjuna Rao said.
Standard Chartered Bank’s Cluster CEO – India and South Asia markets (Bangladesh, Nepal and Sri Lanka) Zarin Daruwala said the MPC has reinforced its commitment to growth by continuing with an accommodative stance and holding the repo rate.
“The RBI’s economic forecasts also point to a robust recovery amidst lower inflation,” she said.
State Bank of India (SBI) Chairman Dinesh Khara said the underlying tone of the policy was optimistic on account of the strengthening growth impulses, which can be attributed to the impressive improvement in the pace of vaccination throughout the country.
The policy statement, while avoiding any surprises, indicates a calibrated move towards managing liquidity and inflation, he added.
Kotak Mahindra Bank Ltd Group President – Consumer Banking, Shanti Ekambaram said the MPC is keeping a close eye on a sustained pick-up in growth, given slowing growth patterns in some of the other economies.
“The policy had a ‘balanced and neutral’ tone — with continued support for growth and a commitment to a gradual and calibrated change in policy based on emerging data and events,” she said.
Indian Banks Association (IBA) Chairman Raj Kiran Rai G said the RBI’s decision to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis was on expected lines.
“The RBI has given a roadmap for the tapering of the excess liquidity from the system in a calibrated manner without disrupting government borrowing programmes and liquidity needs of the economy. Clear signals to the market help the participants to manage their liquidity needs well,” he said.
SBI’s Group Chief Economic Adviser Soumya Kanti Ghosh said the RBI policy statement had to walk a very tightrope. “We believe that the normalization of reverse repo and repo corridor may be possibly delayed beyond December,” he added.
Yes Bank’s Chief Economist Indranil Pan said the RBI walked the talk with its actions by not changing the policy rates.
“Overall, we think that RBI has kept the room open for a reverse rate repo increase in the upcoming December policy,” Pan said.
No changes are envisaged to the repo rate in the current fiscal and can only be addressed in FY 2022-23 after a thorough understanding of the evolving growth-inflation mix, he added.
Tata Capital’s Managing Director and CEO Rajiv Sabharwal said the RBI remains committed to maintaining adequate systemic liquidity to achieve growth and pre-empt any volatility in the yield curve.
“The markets should draw comfort from this guidance and assuage any concerns coming out of a faster than expected policy normalisation. A balanced and orderly policy normalisation in a phased manner will be welcome,” he noted.
LIC Housing Finance Managing Director and CEO Y Viswanatha Gowd said RBI’s monetary policy has once again reiterated the supportive posture taken and in furthering the feel good factor.
“Overall, the unchanged rates will further improve the home buying activities in the forthcoming festive season,” he said.
Essar Capital Ltd Senior Managing Director, Sanjay Palve said, “As the accommodative stance of the government continues, it was no surprise that RBI kept the repo rate and the reverse repo rate unchanged.”
“The focus expectedly still remains to strengthen a recovering economy and support sufficient liquidity to keep borrowing costs low especially for companies which will help drive investments,” he added.