Monetary Policy - Aug 2020: Views of Mr. Amar Ambani, YES SECURITIES

Mr. Amar Ambani, Senior President and Head of Research - Institutional Equities, YES SECURITIES

"Not surprisingly, The RBI's MPC unanimously held status quo on rates. Current level of rates in the system are benign enough to allow for a pause. Cumulative rate cuts since Feb 2019 were also accompanied by sharper cut in reverse Repo as well as lowered level of CRR, in previous policy announcements. As the US Fed kept rates unchanged, it enabled us to retain our rates at current levels, which also helps lure foreign capital. The pause allowed RBI an opportunity to monitor upside risks to food inflation and cost push pressures from rise in fuel prices.

More importantly, the RBI Governor addressed liquidity concerns in Covid crisis for housing, MSMEs, flow of credit in corporate bond markets and facilitating improved platform and system for banks. We see scope for further 50 basis points drop in rates from current level. The policy will be seen as a positive for banking sector since no extension of moratorium, one-time restructuring allowed with strict conditions, a veteran banker in Mr KV Kamath to lead the expert committee and allowing secured loans through Gold as collateral with higher LTVs."

Source : Equity Bulls

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