The Reserve Bank of India’s Monetary Policy Committee kept the benchmark interest rates unchanged to 4% and maintained an accommodative stance for the ninth consecutive time on Wednesday. The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25%, the reverse repo rate stays at 3.35%.
Commenting on RBI MPC Policy, Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services said, 'As expected, RBI keeps all policy rates unchanged today (some section was expecting a hike in reverse repo). Further, the RBI maintains its FY22 real GDP growth/inflation projections at 9.5%/ 5.3%. Overall, there were no surprises in the policy today and it was broadly a non-event.
Going forward, we fear that real GDP growth could be lower than the RBI projections, with inflation falling broadly in line. Along with the rising threat from the Omicron variant, there is a possibility that a hike in reverse repo could be postponed further to April 2022.
However, if growth turns out to be better than our expectations (or in line with/better than RBI projections) and Omicron threat doesn't materialize, a 15bps hike in reverse repo rate in Feb'22 cannot be ruled out. In any case, the Union Budget 2022-23 will also play an important role in the next MPC meet.'
While Vikash Khandelwal, CEO, Eqaro Guarantees said, 'The RBI has maintained continuity in its accommodative stance by keeping the key rates unchanged. While India has emerged as the fastest-growing major economy the RBI’s decision today will further support growth and hasten the economy’s return to normalcy. The central bank has been pushing for a stable policy regime as the economy recovers in aftermath of the pandemic. A phased unwinding of liquidity, stable energy prices, and the manner in which the government navigates through the pandemic will be key to growth in FY22 & FY23.'
Moreover, Nish Bhatt, Founder & CEO, Millwood Kane International stated, 'The RBI maintained the status quo on key policy rates and policy stance was on expected lines. The RBI reiterating the fact that recovery is picking up pace and maintaining a 9.5% growth rate for FY22 was most encouraging.RBI Governor stating that its motto remains a soft landing, that is well-timed reflects well with it mopping up liquidity via VRRR in a phased manner. This is the kind of unwinding the economy will require, as it is in a recovery mode.
The inflation and a spike in energy prices however remain a risk to recovery. Steady crude prices in the next few quarters and continued economic growth with normal business activities will help attain high single-digit growth for current and next fiscal.'
Mohit Ralhan, Managing Partner & Chief Investment Officer of TIW PE said, 'RBI has maintained the accommodative stance on expected lines. The good news is that the economy continues to be on the path of recovery and likely to achieve the target of 9.5% growth in FY22. We have seen the positive impact of economic recovery on our portfolio companies as well, notwithstanding the increase in uncertainties due to emergence of Omicron variant.
While the inflation is likely to remain within RBI projections, it will be closely watching the impact of Omicron variant of COVID on the GDP growth to take any further decision on policy rate. Also, the decision of RBI to release a discussion paper on digital payments is extremely positive, which is likely to further accelerate the growth of digital payments, especially UPI, with a huge multiplier effect on Indian economy.'
Rajee R, Chief Ratings Officer, Brickwork Ratings stated, "RBI has retained rates and maintained its accommodative stance, which is a welcome move to support growth oriented to domestic circumstances and augurs well for interest-sensitive sectors. In view of the evolving economic scenario and uncertainties associated with the scale of recovery especially in view of the possible economic impact due to the Omicron variant and concerns on the supply side challenges to meet the catchup demand, RBI has reiterated its policy support to broaden growth impulses and encourage credit flow to productive sectors.
Continuing with its calibrated liquidity management policy to maintain financial stability, RBI emphasized that VRRR would be the main tool for liquidity adjustment indicating gradual policy normalization on the liquidity front. While stating that headline inflation will peak in Q4 of this fiscal year, RBI maintained its inflation projections at 5.30% for FY22 and a dovish forecast at around 5% thereafter. The decision to allow banks to infuse capital in their overseas branches and subsidiaries and repatriate profits without seeking prior approval of RBI will provide much needed operational and financial flexibility to the banks. Announcement of discussion papers on charges on digital payments in India and on prudential norms for investment portfolio of banks are positive steps."
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