Monetary Policy - MPC maintains status quo - Comments from Industry Leaders

Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank

"The MPC expectedly maintained status quo on the policy rates and stance. The rhetoric too has remained focused on maintaining durable growth as long as inflation remains well in check. We continue to expect RBI to fine tune the surplus liquidity to manage rates and consequently provide guidance on the operating target rate shifting closer to the Repo rate. We retain our base case of reverse repo rate hike in February."

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities

"The policy was as expected and cautious on the uncertainty due to the Omicron variant. Also, the RBI continued with the liquidity normalisation on expected lines without any explicit signal of liquidity withdrawal. The inflation estimates are also lower than what the markets are expecting. Broadly, the policy is more dovish-than-expected possibly given the uncertainty from the new Covid variant. If the Omicron variant is benign, we expect reverse repo hike of around 20 bps possible in the February policy and tad more aggressive liquidity withdrawal."

Dr. Poonam Tandon, Chief Investment Officer, IndiaFirst Life Insurance Company Limited on the today's RBI policy.

The RBI kept rates unchanged and continued with its accommodative stance. In our view the policy is very dovish as the focus continues to remain on achieving durable growth with no indication of a possibility of tightening in the near term. RBI stated that economic activity is improving on expected lines - FY22 GDP growth forecast is retained at 9.5%. RBI expects inflation to peak by March quarter and soften thereafter due to supply side measures taken by the Central Government and excise duty cuts - FY22 inflation forecast retained at 5.3%. The central bank stated effective liquidity management framework will be undertaken as global financial conditions remains volatile and has retained the flexibility to undertake liquidity operations in a calibrated and orderly manner through VRRR. Overall, monetary policy stance is accommodative and committed to supporting growth.

George Alexander Muthoot, Managing Director at Muthoot Finance on RBI monetary policy.

"We welcome RBI's decision to continue with accommodative stance as long as necessary and maintain status quo on rates, the RBI also remains committed to broaden growth impulses and preserve financial stability. I concur with RBI's stance that while the recovery impacted by the pandemic is gaining traction, Private consumption is still below pre-Covid levels, private investment is still lagging and hence the nascent growth still needs policy support. The RBI also continues to rebalance liquidity conditions in a non-disruptive manner. While the challenges interms of managing growth-inflation dynamics, uncertainty with regards to Omicron continue, we are hopeful that the continued policy support will bode well for sectors like MSME, Agriculture and housing. We are also hopeful that pick up in Government spending and pent up demand will ensure that the market sentiment remains positive and demand revival continues to pick up pace thereby supporting demand for gold loans."

Comment from Mr. Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance.

"The RBI on expected lines kept the key rates unchanged for the ninth consecutive time and retained accommodative stance as long as necessary. While rebalancing liquidity conditions in a non-disruptive manner, the Governor reiterated commitment to support the nascent economic recovery and preserve financial stability. The Governor once again retained FY22 GDP growth forecast at 9.5% and stated that while the recovery is gaining traction, it is not strong enough and private investments are still lagging. Amidst the challenges with respect to inflationary pressure, global supply chain bottlenecks, high commodity prices, uncertainty caused due to Omicron, the RBI's motto is to ensure a soft landing that is well timed. While we need to be cognisant about sticky core inflation, continued benign interest rates will be positive to support broader economy particularly SMEs, small businesses and unorganised sector. As we look forward to 2022, the business activities have resumed pan-India, Government spending is picking up, we are hopeful that this will give fillip to urban demand conditions thereby supporting vehicle finance industry."

Source : Equity Bulls

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MonetaryPolicy MPC StatusQuo IndustryReaction