In the first monetary policy since Finance Minister Nirmala Sitharaman presented Budget 2021, RBI Governor Shaktikanta Das stated repo rate will remain unchanged. Along with maintaining the accommodative stance, the central bank adopted measures to manage liquidity. Many industry players felt the move of the RBI complements the budget announcements.
A K Das, Managing Director and CEO, Bank of India said, “Complementing the measures taken in Union Budget, the policy with an accommodative stance, sets the tone for faster economic recovery. Status quo on rates and favourable outlook for inflation will create a conducive scenario for deepening the financial market.
HP Singh, Chairman and Managing Director, Satin Creditcare Network Limited, echoed the same view, “The monetary policy announced today perfectly complemented the budget with its focus on key areas such as liquidity management, regulation and supervision, upgradation of digital payments systems and consumer protection.”
Dinesh Khara, Chairman, SBI feels this policy will support debt management. He said, “The RBI policy announcement today is an acknowledgment and continuation of doing whatever it takes to maintain an orderly, seamless and non-disruptive liquidity management policy to support debt management.”
RBI measures announced during the monetary policy such as extension of enhanced Held to Maturity (HTM) limit, relaxation of funds availability under MSF, an extension of on tap TLTRO to NBFC, deduction of credit disbursed to ‘New MSME borrowers’ from their NDTL for calculation of the CRR will help manage credit flow and liquidity.
In the case of GDP growth for FY 22, RBI projected it at 10.5 per cent which is lower than the economic survey’s estimate of 11.0 per cent. “Nevertheless, RBI reposes confidence in the buoyancy in economic activities across the segments and thrust given in the budget for higher capital expenditure leading to higher economic growth,” said Rajkiran Rai G, Managing Director/CEO at Union Bank of India. “One of the positive news in this context is that both fiscal and monetary policies are on the same page of ‘pro-growth’ which is indeed the need of the hour. Governor has also reiterated the RBI’s resolve to maintain a comfortable liquidity position in the market which they have successfully managed throughout the challenging period of Covid-19 pandemic.”
While status quo were as per the market estimates, some felt the rate cut would have been helpful. Niranjan Hiranandani, National President, NAREDCO commented on the accommodative stance of RBI policy said, “Under the given market scenario and circumstance, the RBI’s direction on unchanged repo rate is very much on the anticipated lines, though a rate cut would have been better to combat the negativity of pandemic led economic crisis across the industry.”
He added that it is extremely important for the regulator to balance its borrowings from the market so that it doesn’t jeopardise the financial stability and disrupts other market players.
Meanwhile, CPI estimates are now revised to 5.2 per cent as against 5.8 per cent projected in the December policy. For the first half of the next fiscal, inflation is projected in the range of 5.0 - 5.2 per cent. Meanwhile, Anagha Deodhar, Chief Economist, ICICI Securities said, “The MPC’s unanimous decision to keep the repo rate unchanged is in line with our expectation. We expect inflation to ease further in coming months, possibly opening up room for rate cut.
