RBI Monetary Policy - A positive policy with significant value-additions

Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank

The Monetary Policy was in line with expectations with no change in the repo or reverse repo rates. The MPC's stance continued to be accommodative and dovish - the current high inflation level is expected to be transient and likely to taper off by Q4'FY21. While GDP growth is estimated to contract by -9.5% , high frequency data indicates a gradual uptick in many segments of the economy.

The policy had a lot of positives for the bond markets - doubling of the OMO amount, introduction of OMOs in SDLs, RBI to conduct on tap TLTRO of up to Rs 1 lakh crore and extension of enhanced HTM limits of 22 percent up to March 31, 2022 for securities acquired between September 1, 2020 and March 31, 2021 are all encouraging steps.

The policy gave a boost to housing finance by linking risk weights to Loan to Value (LTV) rather than the existing loan amount. This is applicable for all new housing loans sanctioned up to March 31, 2022. Loans will have a risk weight of 35 per cent where LTV is less than or equal to 80 per cent, and a risk weight of 50 per cent where LTV is more than 80 per cent but less than or equal to 90 percent.

Overall, a positive policy with some significant value-additions, which should help boost bond markets and overall sentiments.

Source : Equity Bulls

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