RBI Monetary Policy - Feb 2021 - Views of Industry Experts

Lakshmi Iyer, CIO - Debt & Head - Products, Kotak Mahindra Asset Management Company

"RBI maintained the policy repo rate at 4% and reverse repo rate at 3.35%. The MPC also decided to continue with the accommodative stance as long as it is necessary (at least during the current financial year and into the next year) to revive growth and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target. We view the RBI policy statement as dovish despite increase in inflation forecast for H1 as focus remains on growth revival. Bond markets were looking for explicit indications on OMO/OT front, which wasn't given, hence markets were a tad disappointed. Providing retail investors a direct option to invest in government securities is a good development from a long term perspective. Yields to trade range bound from here on and OMOs to determine support for gsec yields."

Churchil Bhatt, EVP & Debt Fund Manager, Kotak Mahindra Life Insurance Company

"During the course of the pandemic, it was RBI who did the heavy lifting in order to support growth. However, with Budget FY22, RBI has successfully handed over the growth baton to the government. In that backdrop, MPC delivered a no-change policy, with MPC's stance remaining accommodative. The move towards gradual and non-disruptive normalization of excess systemic liquidity continues in the form of phased CRR rollback. To support bond yields amidst large government borrowing, RBI has also extended the HTM hike relaxation to FY23. However, more steps including OMOs and Operation Twist may intermittently be needed in order to contain further rise in yields. Overall, the tone of the policy remains growth supportive and fittingly complements FY22 budget."

Mr. Dhiraj Relli, MD &CEO, HDFC Securities views on the Monetary Policy announced by the RBI earlier today.

"As expected, the MPC voted unanimously to leave the policy repo rate unchanged at 4% and assured continuation of accommodative stance well into FY22. This will complement the measures taken by the Govt in the recent budget to revive growth momentum in the economy. Despite the expansionary Budget, support from RBI is needed at this juncture to strike the right balance in ensuring enough liquidity in the system. Thankfully the RBI Governor time and again in his speech assured comfortable liquidity in the banking system going ahead. Overall the policy outcome was largely on expected lines and did not provide any large surprises on either side."

Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities

"RBI remains a major buyer of $ in both spot and derivatives market and that is not allowing the Rupee to appreciate inspite of record foreign capital inflows and speculative long positions in the Rupee. A constructive Union Budget, balanced monetary policy and benign global environment may mean that Rupee may remain strong. Over the medium term it may test 72.50 levels."

Source : Equity Bulls

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