RBI Monetary Policy Feb 2022: Check MPC meeting outcome, major announcements - Who said what about decisions
RBI Monetary Policy Feb 2022 Announcements, MPC Meeting Outcome: This was the first MPC meeting after presentation of Budget 2022-23 in Parliament on February 1.
RBI Monetary Policy Feb 2022 Announcements, MPC Meeting Outcome: Reserve Bank of India (RBI) on Thursday kept the benchmark interest rate unchanged at 4 per cent and decided to continue with its accommodative stance in the backdrop of an elevated level of inflation.
Here are all the developments on RBI Monetary Policy Feb 2022 Announcements, MPC meeting outcome, major decisions and reactions:-
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Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank Ltd
"The RBI’s monetary policy committee (MPC) has continued with an “accommodative stance” while maintaining status quo on key rates. The RBI has signalled that it will continue to support economic growth as long as required.
Policy outlook is stable but the narrative is slightly different from what the markets had expected. The real GDP growth for FY23 - seen at 7.8 per cent - seems conservative. Retail inflation is expected to peak in Q4 FY22 to 5.7%. However, it is likely to glide down over the next few quarters and is projected at 4.5% in FY23. While risks of higher crude prices remain, overall growth and inflation is estimated to be stable through FY23.
The rigour of vaccination, enhanced capex and infrastructure build-out by the government would ensure increased return to normalisation even while demand pull is still relatively muted.
MPC’s key mandate is to keep inflation within its target band of 4% to provide the necessary liquidity support for sustained domestic recovery. With RBI sending dovish signals, interest rates are likely to be stable in the short-term and RBI is likely to adopt a calibrated approach."
Pranay Jhaveri, MD, India and South Asia, Euronet Worldwide
Built on UPI rails, e - Rupi removes friction, works in an offline mode, and enables the large population of people receiving DBT to grow their digital payments footprint. This step of raising the e- Rupi limits to 1 lakh would accelerate DBT dissemination by the Government and allow accrual, ultimately resulting in improved welfare of the underprivileged section of the economy.We have built this capability on our UPI platform and the same can be leveraged by our banking partners.
Pramod Kathuria, Founder & CEO, Easiloans
"The Feb-22 monetary policy announcement from RBI was much awaited especially post the financial budget. Coming directly to the part which impacts home loans and real estate i.e. the rates. The RBI decision of keeping the repo and reverse repo rates unchanged is a hugely positive signal for the home loan sector and consequently for the real estate segment. Unchanged rates at a time when home loan interest rates are at a 10-year low is an impetus for homebuyers to go out there and purchase a home in the next few quarters. This will add to the growth outlook for real estate developers for the coming months while as banks or fintech enable digital loans, this is an opportunity to build further on the momentum generated over the last year. Overall, a positive move by the RBI and I could already see an upward trend in key realty and banking stocks following the announcement."
Anshuman Narain, Vice-President, Cashbean (P.C.Financial Services Pvt. Ltd.)
"Great move by the respected regulator to keep the interest rates unchanged. This will surely help further stimulate the post-COVID Indian economy by keeping the flow of cash going steady for both individual and institutional borrowers. The financial services sector should definitely see this as a vehicle for further growth and investments."
Neha Khanna, Director, ValPro
"The accommodative stance from policy makers with no big changes are key for the markets. With the budget behind us and the resilience of the economy albeit a third wave, the economic growth will continue to be reflected in the performance of companies. The bounce back from the third wave will be accelerated by the support from the government. We’re bullish on the listed markets and anticipate a growth spree through the remaining part of FY22 and continuing through FY23."
Jyoti Roy - DVP- Equity Strategist, Angel One Ltd.
"The RBI in its MPC kept the repo rate and the reverse repo rates unchanged at 4.0% and 3.35% respectively. While the decision to keep repo rates unchanged was in line with expectations markets were expecting a 25bps hike in the reverse repo rates to 3.5%. The RBI expects GDP growth for FY23 to be at 7.8% while they expect inflation to peak out in Q4FY2022 at 5.7% before moderating to 4.5% in FY2023, though hardening crude prices could pose upside risks to inflation. The RBI also maintained that they will continue to use variable rate reverse repo (VRRR) as the main instrument for draining out excess liquidity from the markets. Limits under the Voluntary Retention Route (VRR) have also been hiked from ₹1.5 lakh crore to ₹2.5 lakh crore with effect from April 1, 2022. This will provide access to additional sources of capital for the domestic debt market including g-secs. The RBIs decision not to hike reverse repo rates and keep an accommodative stance surprised the markets as the RBI was largely expected to change its stance to neutral. While the RBIs decisions came as a pleasant surprise for the markets, concerns remain over-aggressive Fed tightening, large Government borrowings along with upside risks to inflation due to high commodity and crude prices."
Mandar Agashe, MD, Founder & Vice-Chairman of Sarvatra Technologies ltd
"e-RUPI is a great innovation on the UPI platform. It can be seamlessly availed even in the absence of a bank account, smart phone or internet connectivity and therefore, is an excellent instrument to drive financial inclusion at the last mile. e-RUPI was launched last year on a pilot basis primarily for Covid-19 vaccination purposes. Now that it has witnessed success for Covid-19 vaccination use-case, RBI has increased the cap from 10k to 1 lakh and has also converted it into a multi-use payment voucher, thereby extending its utility across a wide range of new use-cases that will emerge over time. e-RUPI is an excellent initiative whereby a host of services including welfare services can be extended directly to the beneficiaries on their mobile in the form of an e-voucher powered by UPI. Thus, a contactless and cashless prepaid digital payment system will go a long way in bringing people without a bank account, a smartphone and internet connectivity to UPI.
Additionally, this will also interest the private sector and MSMEs to deliver employee benefits besides exploring a wide range of B2B transactions. Also, the new payment medium can be controlled and therefore, despite raising the cap or using it more than once, the issuer can ensure the amount is spent for the allocated purpose and can track the redemption. The proposal would expand the usage of digital payments, especially to India's most remote locations, propelling the country closer to its long-held goal of being a cashless economy."
Marzban Irani, CIO – fixed income, LIC Mutual Fund Asset Management
o Governor mentioned that inflation is temporary. Will decline in medium term.
o Since there is less borrowing till March 22, market should remain range bound.
o Global bond yields and oil will give direction to the market in the short to medium term.
The actionable for retail investors from the RBI's policy is one, they should remain cautious due to huge borrowing starting April 2022, even as global yields and commodity prices remain elevated. Secondly, they should avoid locking in long term debt investment at current yields. This translates into retail debt investors taking exposure in debt schemes with duration of 1 to 3 years three years depending on individual risk appetite
Richa Roy, Partner, Cyril Amarchand Mangaldas
"The RBI’s move to keep rates unchanged is an extremely progressive one, that heralds stability and continuity in light of domestic and international developments. In the shadow of the Union Budget, it indicates continued access to low-cost credit which will power growth and optimism.
Additionally, in the Governor’s statement, the emphasis on financial stability, proactive regulatory and supervisory frameworks for vulnerabilities in the banking and non-banking finance sector complements the various initiatives taken this far to address regulatory infirmities and arbitrage. The Governor lauded the more robust balancesheets with better capital adequacy and lower NPAs. There is an opportunity for this to be supplemented with ARC reform which the RBI has taken steps towards as well as augmention of the NCLT infrastructure. The RBI’s continued attention on liquidity, governance, risk management and resolution of banks and NBFCs is heartening as multiple institutions continue to undergo resolution.
The enhancement of the VRR limits will add depth and liquidity to the corporate bond market, increasingly an important source of credit to industry. The CDS guidelines will also deepen and add maturity to the corporate bond market
Finally, RBI continues its focus on Fintech with the issuance of Master Directions on Outsourcing on Information Technology Governance, Risk, Controls and Assurance Practices which will add safety, security and stability to financial transactions undertaken by through the financial system. In subsequent statements, the Governor reiterated concerns around cryptocurrencies. It is hoped that the regulatory framework for crypto will compliment other moves by RB and the Government".
Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance
“Overall an Ultra Dovish Policy with an overarching focus on ‘’Durability of Growth”. The dovish verdict comes at a time when the MPC is juxtaposed with a higher than expected government borrowing in FY23 and has chosen to stay put and not react to the incumbent global and domestic pressures warranting for maneuvering of the monetary policy. Belying the market expectations of a reverse repo rate hike, MPC has continued with its effective stealth tightening by way of Variable Rate Reverse Repo (VRRR’s) and has chosen to preserve its ammunition for later, and play the waiting game for now. While the lower Inflation forecasts coupled with the accommodative status quo have imparted short-term respite to the reeling bond markets post the Union Budget, we reckon the upside risks to Inflation may have been downplayed by MPC. “
Dr. M Govinda Rao, Chief Economic Advisor, Brickwork Ratings
“The decision to hold policy rates by the MPC is on expected lines. The RBI’s continued focus is on reviving growth reinforced by potential downside risks to economic activity from the highly contagious Omicron variant. Improving inflation outlook provides comfort for the RBI to continue with the current policy stance. The MPC was of the view that continued policy support is warranted for a sustained, durable and broad-based recovery. On the GDP guidance, the RBI forecasts 7.8% growth for FY23, which is slightly lower than the 8% to 8.5% GDP forecast made by the Economic Survey 2021-22. This, in part, maybe due to the base effect arising from the revision of GDP for 2020-21 from (-) 7.1% to (-) 6.6%. The growth concerns arising from the uncertainties related to Omicron and global spillovers, has warranted the RBI to maintain the policy rate stable to sustain the economic recovery. It has sounded a note of caution, as the persistent increase in international commodity prices, the surge in the volatility of global financial markets, and global supply bottlenecks can exacerbate risks to the outlook. On the inflation front, the RBI sees prices softening from the current levels and forecasts an 4.5% inflation for FY23. The expectation of inflation moving within the MPC’s upper range provides scope for the continuation of the accommodative policy stance. However, the forecast on inflation is highly dependent on normal monsoon and stability in international commodity prices including other domestic factors like demand and supply situation”.
George Heber Joseph, CEO/CIO, ITI Mutual Fund
Today’s MPC meeting decision to keep the repo rate unchanged and continue with the accommodative stance was expected, but the decision to not increase the reverse repo rate is a positive surprise. The RBI Governor’s accompanying statement was as dovish as it could be in current conditions. Central Bank focus remains on active liquidity management to anchor “effective” policy rates and significance of reverse repo seems to have diminished in present times. Near term bond market apprehensions seem addressed by today’s policy, but fears related to the smooth conduct of coming year’s government borrowing programme are likely to remain in a global headwinds’ era.
Seema Prem, Co-founder & CEO, FIA Global
The Reserve Bank of India's decision to keep repo rates unchanged and maintaining the 'accommodative' stance is a move that is supportive of growth. It is clear that the focus is on market profits for banks and on keeping inflation on check. Given the budget's bent towards digital banking services, the biggest beneficiaries of this move will be fintechs in the financial inclusion space, due to the overall positive economic environment, especially, given that the Omicron worry is now behind us.
Price stability also remains the cardinal principle for RBI to keep liquidity at optimal levels. I believe we are looking at a more durable and a broad-based recovery keeping in mind inflationary growth. It is a comfortable stance and will look to improve uncertainties with regards to the omicron variant.Vinit Dungarwal, Director, AMs Project Consultants Pvt. Ltd.
By leaving the rates unchanged and continuing the accommodative stance MPC has sent out a clear signal that they are focused on the long-term growth of the economy. The projections also indicate that inflation is on a downward trajectory, which is another positive indicator. We welcome this move by RBI as it helps in holding the interest rates and sustaining the current growth momentum in the real estate sector. This move will help in improving affordability, lead to demand generation and have a multiplier effect on the overall economy.
Lincoln Bennet Rodrigues, Chairman & Founder, The Bennet and Bernard Company
The continued intervention by RBI and holding on to the rates has helped in demand generation in the real estate sector. Economic growth needs to be supported through monetary policy and this is the foremost reason that the RBI has continued its accommodative stance which has invoked a sense of optimism. This works well for all home loan borrowers as the environment of affordability will continue and will not harden anytime soon. The continuation of low home-loan interest rate regime is bound to instill more confidence to the home buyers and support the ongoing market and economic recovery which has been promising in the recent past. This should augur well for home buying sentiment as it is quite clear that increasing interest rates would impact overall demand at a time when the government is keen to boost consumption. The green shoots of economic revival coupled with the prevailing low interest rates will continue to be conducive for the residential sector. We also hope that the government looks into specific measures to support developers and continue to boost residential real estate uptake in the upcoming months.
Dinesh Khara, Chairman, SBI
“The RBI policy statement is an affirmation to keep the rate structure at reasonable levels to support an incipient growth recovery. Amidst global uncertainties, the policy has provided admirable support to market sentiments and has rightfully indicated it has enough non conventional measures to keep the demand supply of g-secs in reasonable balance. The regulatory guidelines of credit default swap and rupee derivatives market will ensure a deepening of markets. The enhancement of cap under e-RUPI could facilitate a faster adoption of digital transactions, that could eventually usher in a roll out of digital rupee."
Sanjeev Arora, Director, 360 Realtors
RBI and the government have taken a host of liquidity-building steps and iterations of rate cuts in the past, which augured well for the Indian economy. In FY 22, the Indian economy is set to grow at 9.2% and is touted as one of the fastest and most attractive economies in Asia. Moreover, Sensex is looking strong and will cross 100,000 in the next 5 years, as per reports by leading investment houses. This further indicates that the Indian economy is on a strong footing. Meanwhile, the government should consider that a FED rate hike might impact the economy adversely. Moreover, the rise in oil prices will also weigh on the economy. Hence, regulatory agencies can consider the option of lowering rates to further support growth. Moreover, inflation is still within the safe boundaries, which further gives RBI space to maneuver. Healthy economic growth and focus on spending will always boost the realty demand.
Pradeep Aggarwal, Co-Founder & Chairman, Signature Global and Chairman - ASSOCHAM National Council on Real Estate, Housing and Urban Development
"With current market circumstances, the apex bank's accommodative stance on the status quo and holding the repo and reverse repo rates unchanged is an honorable and cautious move. We predict that housing will experience a huge influx of new buyers as a result of the Government's focus on affordable housing, which was evident even in the Budget."
Vikas Garg, Deputy Managing Director MRG World
Low home loan rates have benefited buyers of affordable homes; the trend is expected to continue, which is excellent news for the segment that sees the most demand. The market is robust and has begun to pick up speed, which will continue to improve. We expect strong sales as consumers want to take advantage of the low rates before they rise.
Vikas Chaturvedi, CEO, Xanadu Realty
"RBI's decision to keep repo and reverse repo rates unchanged is a great decision. Q3 of this fiscal demonstrated sustained momentum, which built confidence in the economy. The MPC's stance instils a positive sentiment across sectors, reviving and sustaining growth. This will continue to encourage retail and corporate lending by financial institutions. The economy is on an upswing, and the real estate sector has been recording an impressive stride forward. RBI's decision to keep the repo rate steady will imply that home buyers will continue to benefit from low-interest rates. Favourable economic conditions will facilitate recovery and propel an uptick in real estate demand significantly. This would be an ideal time for homebuyers and corporates looking for properties, to take positive decisions".
Dhruv Agarwala, Group CEO, Housing.com, Makaan.com & PropTiger.com
The RBI decision to leave key rates unchanged in its latest monetary policy review is along expected lines since the economy in general and the real estate sector in particular still need a lot of policy support to stay firmly on the path to recovery. The RBI move means home loan interest rates will continue to hover at record low levels, encouraging buyers to buy property. This will solve the twin purposes of helping the government move towards its housing for all goal while also giving a major boost to the real estate industry.
Ashwinder R. Singh, CEO-Residential, Bhartiya Urban
The RBI expressed support and empathy for businesses in the current economic situation, which must deal with the problems that come with these challenging COVID times, by maintaining an accommodating rate narrative. This remains positive for real estate, especially for homebuyers, who can still afford new homes because of low home loan interest rates.
Amit Modi, Director ABA Corp and President Elect CREDAI Western UP
The RBI has kept the repo rate unchanged, which would be helpful for the real estate sector throughout its recovery course. We have to understand that this industry does not work alone but depends on the growth of all associated industries. The accommodative stance that RBI has taken will boost the economic environment and lead to a conducive situtation for the stakeholders.
Sagar Saxena, Project Head, Spectrum Metro
RBI has kept the repo rate unchanged as expected which will help the commercial realty tread on a recovery path preventing from the third wave of the pandemic. The policies announced by the MPC will continue this trend of sustainable recovery in the industry and will also be effective in keeping the real GDP growth at 7.8 per cent in FY 2023.
Malcolm Athaide, CEO and Co founder, Agrim Housing Finance
"By keeping key rates unchanged and reiterating an accommodative stance, the Reserve Bank of India is signaling that growth is a priority, much in line with the announcements made in the Union Budget presentation. The RBI Governor has stressed upon the need to provide policy support on a durable basis to support growth. What was significant however, was the conservative projection of real GDP growth of 7.8%. This is considerably lesser than the market expectation of 8-8.5%. This indicates that the apex bank is adopting caution and may choose to opt for aggressive tightening of policy going ahead."
Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance
“Pleasantly surprised by RBI’s more dovish than expected stance and it continued to prioritise growth by keeping rates unchanged and also maintaining an ‘accommodative’ stance for as long as necessary. Despite commodity prices being elevated, RBI is confident of maintaining prices and that is encouraging. The accommodative stance also indicates that there will be no aggressive rate hikes in 2022, which is a positive for consumers. Any hike in rates would have impacted MSME which are in revival mode. Both the RBI and the government with its thrust on capital spending in the recent budget are working in tandem to revive and support broad based economic recovery. Considering this we continue to remain optimistic about revival in CV demand especially demand for Medium to heavy vehicles (MHCV) which has seen demand contraction in last two years. CV sales in Q3 have been flat, but now with the infra push from the budget 2022 we expect a healthy revival in credit in 2022.”
Mahendra Jajoo, CIO, Fixed Income, Mirae Asset Investment Managers (India) Pvt. Ltd.
In contrast to general expectation, RBI pleasantly surprised the market with keeping key rates unchanged and also retaining accommodative policy stance. Inflation for FY 23 is projected at 4.5% vs that for FY22 at 5.3%. The assessment of a softening inflation in the coming year has possibly created space to maintain lower rates for longer, even as major global central banks are guiding for an accelerated policy normalization. GDP growth for Fy23 are projected at 7.8%, somewhat lower than broader market expectation of 8%+, again reflecting need to continue with an accommodative policy. Bond markets further improved on the positive momentum started after cancellation of auctions for last two week that reflected regulators indications. Benchmark 10Y govt bond yields eased to 6.72%. With such a strong guidance from RBI, we expect bond yields to remain range bound going forward, supported by comfortable liquidity and RBI intervention as and when felt appropriate.Ankit Bhatnagar, Head of Product, Mswipe
“RBI’s decision of increasing the cap on e-RUPI vouchers to Rs. 1 lakh from Rs.10,000 will further democratize digital payments and will definitely help increase digital payment acceptance in Tier 2 and 6 in 2022. Unlike other digital payment modes, beneficiaries need not have a bank account for e-RUPI services and hence RBI’s proposal will further provide enhanced flexibility, transparency and ease to customers while allowing them to use a single voucher multiple times. At Mswipe, we believe that the increase in cap on e-RUPI will see rise in e-RUPI transactions across its 5.25 lakh terminal and 1 million QR merchants. Besides, increasing NACH Mandate Limit for TReDS Settlements from INR 1 crore at present to INR 3 crore is a welcome move. This will pave the way to help bridge the current MSME credit gap, reduce processing time and ease the financing needs of MSMEs.”
Divakar Vijayasarathy, Founder & Managing Partner, DVS Advisors LLP.
"The unchanged repo rate is on the expected lines. It was widely expected that the MPC would hike the reverse repo to suck excess liquidity but the MPC choose to maintain status quo. The uncertainty in terms of the further variants coupled with inflation projections being within the range of the acceptable range of 4% +_2 could have weighed the decision in terms of maintaining the rates. The GDP projections are also in line with the government s estimate presented in the budget. The CAD being 2% of the GDP is good from the currency valuation perspective. Given the fact the MPC continues its accommodative stance, MPC might continue hold rates in the next review as well unless any other global event such as fed hiking rates has a considerable impact."Nish Bhatt, Founder & CEO, Millwood Kane International
“ The central bank keeping the key rates and policy stance unchanged is on expected lines. It is the right move as it will help sustain growth as the economy battles the challenges posed by the latest wave of the pandemic. The market has clearly cheered the RBI policy, the central bank has shown no sign of nervousness with regard to the government's borrowing program.
The central bank viewing the current inflation as transitory indicates easy monetary policy for a longer period of time. Elevated crude prices and the new variant of COVID19 remain a key risk to growth going forward.”
Siraj Saiyed, Director, ARETE Group on RBI-MPC meeting
"It is for the tenth time in a row that RBI kept the key policy rates unchanged at 4 percent. The unchanged repo rates will help maintain status quo on the prevailing low interest rate regime for some more time. With this move the environment for affordability will move well for the home loan borrowers. Another decision of RBI to increase mandate limit from Rs 1 crore to Rs 3 crore for trade credit to MSMEs is likely to mitigate the impact of the pandemic on the sector".
Ram Raheja, Director at S Raheja Realty
“After keeping the repo rate and reverse repo rate at a record low of 4.00% and 3:35% for nearly two; RBI was expected to keep it unchanged till mid-2022. The economy is recovering, and this move ensures sustainable growth would continue to be the focus. Alongside this, the pandemic and lockdown continue to be a hopeful prospect for the real estate sector given it is a safe-haven and tangible asset at the time of crisis. A low home loan interest rate regime has been greatly instrumental in further stimulating India’s real estate sector eventually increasing investment and home-buying in the last two years. The coming quarter continues to remain optimistic for most of the sector ultimately reflecting in the S&P BSE realty index.”
Rajiv Sabharwal, MD & CEO, Tata Capital Ltd.
-Contrary to market expectations RBI continues to maintain its rate status quo and accommodative policy stance as well. This will accelerate the growth momentum in the economy. Further, RBI has taken cognizance of the measures taken by the global central banks with respect to tightening of interest rates but remains committed to support sustained economic activity.
-The recent spike in crude oil prices and the spill over effect on the inflation trajectory is being monitored closely by the RBI. The softening in food inflation and strong agricultural output will help manage inflation within the comfort corridor of the RBI
-RBI continues to offer assurance to the markets that there will be a rebalance in the overall systemic liquidity on a dynamic basis and aims for a smooth evolution of the yield curve. The bonds market should draw comfort from this measure and alleviate any price volatility concerns.
Samuel Joseph, DMD, IDBI Bank
“MPC has again surprised the pollsters. By leaving the rates unchanged and continuing the accommodative stance and more importantly the guidance for 2022-23 inflation at 4.5%, the policy is extremely positive for the markets. The divergent monetary policies across the globe could throw up surprises going forward, which could be tackled in the April policy”.
Dilip Modi, Founder, Spice Money
“The launch of e-RUPI by the RBI last year was a great move towards bridging the gap that exists in rural areas when it comes to financial services. The RBI’s recent proposal to enhance the cap from ₹10,000 to ₹1 lakh will not only further facilitate the delivery of various government schemes to the beneficiaries more efficiently, but also lead to greater adoption of the payment system. Additionally, the move to allow the use of e-RUPI vouchers multiple times will help in addressing the challenges faced by the rural population including low internet penetration and provide safe and secure payment solutions.
The recent proposal will enable us to reach the government’s goal of financial inclusion in a better and faster way. We at Spice Money support this move whole heartedly and hope to see more such initiatives being introduced by the government that will help in empowering the unbanked and underbanked population our country.’’
Rajee R, Chief Ratings Officer- Brickwork Ratings
"In line with BWR’s expectations, RBI continued its dovish stance and remained accommodative by reiterating that despite the economic recovery and aggregate demand gaining traction and improving inflation outlook, continued policy support is warranted to support domestic growth, which is the highest priority. Continuing with its calibrated liquidity management policy to maintain financial stability, RBI emphasized that VRR and VRRR would be the main tools for liquidity adjustment indicating gradual policy normalization on the liquidity front. While stating that headline inflation will peak in Q4 of the current fiscal, RBI maintained its inflation projections at 5.30% for FY22 and a dovish forecast at around 4.50% thereafter. Enhancement of cap and multiple-use under e-RUPI prepaid digital voucher, new credit default swap (CDS) guidelines (to be announced today) and extension of on tap liquidity for emergency health services and contact intensive sectors till June 30, 2022, are welcome steps. Hiking of limit under Voluntary Retention Route (VRR) scheme from Rs. 1.5 Lakh Crs. to Rs. 2.5 Lakh Crs. will provide additional sources of capital for domestic debt markets and government securities. Increase in NACH mandate from Rs. 1 Cr. to Rs. 3 Crs. for TReDS related settlements are expected to improve the receivables financing and overall liquidity position of the MSMEs."
Prasenjit Basu, Chief Economist, ICICI Securities
"Given global headwinds and the prospect of a gradual moderation of India’s CPI inflation, it is eminently sensible to persist with the accommodative stance.
A key reason to keep the policy interest rate at historic lows longer is to spur a more durable rebound in private consumption. India did not massively boost monetary growth during the worst phase of the pandemic (as the US Fed, ECB and BoE did), so there is less need for the RBI to roll back monetary accommodation this year.
As the strong rabi crop boosts food supply in April-June, and other supply disruptions from the Third Wave of the pandemic recede, India’s CPI inflation will moderate, allowing policy rates to remain low for longer than in the developed world. That will provide a boost to equity valuations, and help spur a broad-based recovery in consumption and investment."
Rajeev Radhakrishnan, CIO-Fixed Income, SBI Mutual Fund
"RBI continues to chart a course diametrically opposite to what most Central Banks have been doing. A status quo on rates and guidance was accompanied by the governor’s statement that continued to stress on continued policy support to ensure broad based and durable growth, along with continued reference to the impact of the pandemic. A few procedural changes on the liquidity framework were accompanied with no clear guidance on unwinding durable liquidity. While the near-term impact has been an easing in rates with a curve steepening bias, continued reluctance to acknowledge a shift, in the context of changing dynamics both globally and with recovering domestic growth remains surprising. In this context, continued volatility in market rates remains the base case as there seems no clear fundamental reason to validate lower rates, except continuing dovishness and lack of pre emptive policy normalisation actions by the central bank."
Shanti Lal Jain, MD & CEO of Indian Bank
“By conducting VRRR and other measures RBI will look to control liquidity in the system. Increasing the cap for FPIs to invest in domestic bond market will help the Government borrowing plan. Further, allowing banks to participate in off-shore swaps, increasing mandate limit for trade credit to MSMEs and extension of On-tap credit for health & contact intensive sectors till Jun’22 are welcome moves for the Banking sector.”
Sandeep Runwal - President, NAREDCO Maharashtra and Managing Director, Runwal Group
"In view of inflationary concerns, the Reserve Bank of India (RBI) has continued to maintain the status quo on key policy rates. It has taken a proactive stance to ensure liquidity. The MPC also maintained that the 'accommodative' stance will continue as long as needed. This will provide the required fuel for the growth of the economy along with the real estate industry, which is allied with several other sectors. As the industry is recovering from the impact of the 3rd wave of Covid, it is important to support growth and spending. By keeping the interest rates unchanged, RBI has clearly indicated that it is looking for sustainable growth and boosting consumer sentiments."
Amar Ambani, YES SECURITIES
“RBI delivered an ultra-dovish policy by maintaining a status quo on the policy rates and the stance. The status quo has triggered strong rally in sovereign bonds, with benchmarks yields retreating from the recent highs. It clearly conveys that RBI is quite committed to orderly evolution of yields, notwithstanding the headwinds in the form of inflationary pressure, hawkish Fed and a large Indian government borrowing plan for FY23. Its stance is backed by its expectation of easing of price pressures by end of the fourth quarter of FY22. This dovish policy is in line with our view that RBI will support growth and not turn hawkish for as long as it can, considering that the US Fed is looking to taper and raise its rates.”
YS Chakravarti, MD & CEO, Shriram City Union Finance
“The MPC’s unanimous vote to keep key policy rates unchanged is encouraging for credit growth which has been lagging at FY19 levels. The accommodative stance by the RBI will support economic activity, which is slowly getting back to normal. The Capex cycle is about to unfold, driven by the Union Budget 2022 infra spends and all-time low-interest rates will be supportive. The MSME segment, which forms the bulk of our loan book, has weathered the effect of COVID-19, and with the rising cost of raw materials, the low cost of funding will enable a faster return to profitability. Festive demand for 2-wheeler loans hit a record for SCUF; we expect the momentum to continue into 2022, as long as COVID doesn’t play spoilsport.”
Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank
"The RBI was emphatic in conveying their commitment to support recovery in economic activities. While uncertainty about the inflation trajectory in the coming months cannot be ignored, the central bank seems clear in favour of following an extremely calibrated and nuanced pace of normalization of monetary policy and withdrawing the crisis time support, even if that means erring on the side of caution.
The RBI was more proactive in providing large quantum of liquidity to support the economy during 2020 and 2021 rather than cutting rates aggressively. Thus, it is not surprising that the central bank is now prioritizing unwinding of surplus liquidity over rate action.
Bond yields witnessed a knee-jerk uptick following the larger-than-expected government borrowing in the Union Budget. Today’s MPC announcement of status quo on the reverse repo rate will likely provide a cushion to yields and help it stay closer to the pre-budget levels in the coming weeks."
Shrey Aeren, Managing Director & Country Head of Berkshire Hathaway Home Services Orenda, India
"The decision to maintain the repo rate and reverse repo rate by the RBI; is a welcome step. There were lots of speculations that the rates might change during the policy meeting to reduce the impact of inflation. This status quo will create demand for high-involvement products like real estate. Liquidity along with low interest is the key to the recovery of the real estate industry and the overall economy. The real estate sector is showing signs of recovery and needs government hand-holding for a few more quarters."
Dr. Malcolm Athaide, CEO and Co founder, Agrim Housing Finance
"By keeping key rates unchanged and reiterating an accommodative stance, the Reserve Bank of India is signaling that growth is a priority, much in line with the announcements made in the Union Budget presentation. The RBI Governor has stressed upon the need to provide policy support on a durable basis to support growth. What was significant however, was the conservative projection of real GDP growth of 7.8%. This is considerably lesser than the market expectation of 8-8.5%. This indicates that the apex bank is adopting caution and may choose to opt for aggressive tightening of policy going ahead."
Puneet Pal, Head-Fixed Income, PGIM India Mutual Fund
"RBI continues to sound dovish as it refrained from hiking the reverse repo rate as was widely expected by the market. RBI has retained its accommodative stance reiterating that it will retain the accommodative stance as long as necessary to revive and sustain growth. Though the RBI has refrained from hiking the reverse repo rate , the Governor in his statement did mention that the effective reverse repo rate increased from 3.47% in august 2021 to 3.87% as on February 4 2022.
Market yields have taken support from the cancellation of auction as announced by RBI earlier this week and now this dovish stance by RBI will mean that yields remain largely stable till March 2022. We expect the curve to remain steep with the shorter end of the curve outperforming the longer end."
Honeyy Katiyal- Founder, Investors Clinic
"The MPC is to be commended for maintaining an accommodative stance. The prevailing low home loan rates are enticing for homebuyers and visibly the growth in number in housing sales is reflective of the constant policy support. The Government has been supportive and is expected to continue taking affirmative measures as long as it is necessary to revive the economy and alleviate COVID-19 impact. We expect the positive sentiment will further bring cheers to real-estate developers."
Manoj Dalmia, founder and director, Proficient equities Private Limited
"The Monetary Policy Committee has kept the repo rate unchanged at 4.00% keeping an accomadative stance to support growth. The rates have remained almost unchanged for the past 10 sessions.The reverse repo rate is unchanged at 3.35% it was expected there would be a change of 15-40 bps to support the budget decision for growth. Increasing Reverse Repo usually signals RBI is ready to pull out excess liquidity, it can be said that it's being done through Variable Rate Reverse Repo.
Inflation range is about 2-6%-RBI Sees growth rate for FY23 at 7.8% forecasting Q1FY23 17.2%,Q2FY23 at 7%,Q3FY23 4.3%,Q4FY23 at 4.5%
-CPI inflation forecast for FY22 at 5.3% and to be around 4% in second Half FY23
- Core inflation stood at 6.2% YoY."Vikash Khandelwal, CEO, Eqaro Guarantees
“After a Capex-heavy Union budget, the RBI has stayed the development course by maintaining the status quo. While the expectations were on the hawkish side, the unchanged repo rate and policy stance are welcome. The special dispensation for the contact-oriented segment will be a further boost.
The RBI not considering the rising inflation as a worrying factor has provided support to the bond market. Staggered withdrawal of liquidity measures will help the market adjust itself to changing scenarios. The hike in the limit for trade credit for MSMEs from Rs 1 cr to Rs 3 cr will support a segment that's a key contributor to the economy.”
Y. Viswanatha Gowd, MD & CEO of LIC Housing Finance
“As the housing sales across major cities are at an all-time high, the unchanged policy rates will continue to invoke a sense of optimism for home and property buyers. The policy rates have remained unchanged for the 10th time in a row and we expect the low home loan interest rate regime to continue for some more time. All this augurs well for the sector and will boost sentiments further. ”
Sreeram Ramdas, Analyst at Green Portfolio, SEBI Registered Portfolio Management Service Provider
"This meeting has underlined how focused the RBI is on economic progress and manufacturing activity above all else. They do not seem too worried about decoupling from the US Fed’s stance. This is understandable considering in India the expected inflation is within the RBI’s 2-6% range, and hence they can afford to delay the policy shift. However, we can expect the first hike in reverse repo rates to come in the next meeting as the economy progresses further.
Moreover, the mentions of credit default swaps and the digital rupee are very encouraging for the corporate bond market and the fintech space. "
Raghvendra Nath, MD of Ladderup Wealth Management Private Limited
“The announcements were in line with our expectations. Post growth-oriented budget announcement it was necessary to maintain a conducive environment that would support the growth. Our economy is still at a stage where a lot of our industries are inching back to normalcy from the pandemic and any rate hikes at this stage could have hindered with their recovery especially for the small and medium enterprises where they need access to cheap capital to be back on track. The GDP growth forecast for FY23 of 7.8% along with the inflation forecast of 4.5%, would result in a Nominal GDP growth of 12.5% for FY23 indicating strong economic recovery. Though with oil trading around $90 and projections of further price increases, it would be interesting to see the impact of oil on inflation, especially as the inflation is not only being affected by supply side challenges but also from demand side. We believe that in near term, businesses will continue to benefit from lower interest rates and high liquidity in the system, especially those businesses with capex in pipeline."
Anurag Mathur, CEO, Savills India
“The Monetary Policy Committee has voted to keep benchmark lending rates unchanged while taking cognizance of the gradual tapering of third wave of infections. The accommodative stance is backed by consumer inflation remaining within tolerance level in recent times. For FY 2023, the RBI estimates inflation growth to be 4.5%. Real estate, especially the residential segment, has benefited from the historically low benchmark lending rates to a large extent. This is likely to keep gaining strength, as demand has remained consistent in recent quarters. The recent budgetary announcements focused on infrastructure which will also welcome the benign rates and accommodative stance. The economic growth is expected to be led by urban capacity building, infrastructure upgrade, multimodal logistics parks, affordable housing and SEZ policy and hence the RBI maintaining stable rates is welcome for industry stakeholders.”
Abheek Barua, Chief Economist, HDFC Bank
“The RBI policy was largely on expected lines with, yet again, a clear emphasis on ensuring that the economy is on a path of durable growth recovery. It showed a clear tilt towards growth and a view that inflation, where elevated, is driven more by the supply disruptions rather than entrenched demand side pressures. Also, its projections show that inflation is on a downward trajectory. This was the first policy of the calendar year and perhaps sets the tone for the rest of the year. Were that indeed the case, the RBI is likely to follow a gentle approach to the normalization and ultimately withdrawal of monetary support unlike Western central banks that have switched to a hyper-aggressive mode. This is consonant with the growth and inflation dynamics specific to India.”
Ramesh Nair, CEO, India & Managing Director, Market Development, Asia at Colliers
RBI continues to maintain an ‘accommodative’ stance keeping the repo rate unchanged yet again at 4% in its monetary policy meeting in Feb 2022. This support is needed for sustained recovery in economic growth. At a time, when the market was expecting a hike in reverse repo rate and change in stance of the Central Bank to ‘neutral’ to be a precursor to future rate hikes, the ‘status quo’ of the Bank comes as a breather for the real estate sector. In the absence of the specific demand-side interventions from the Budget 2022-23, prospective homebuyers can continue to benefit from lower home loan interest rates which are here to stay for now."
Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank
“The Policy has been far more dovish than expectations, decoupling completely from the global financial tightening. We see the inflation trajectory by the RBI very optimistic. Our estimates are 50bps higher than RBIs FY23 inflation estimates. We expect the RBI to play catch up in the April policy. RBI may want to use overnight VRRRs to bring the overnight rates closer to repo rate even before the fixed reverse repo hike.”
Mihir Vora, Senior Director & Chief Investment Officer, Max Life Insurance
“The policy stance and the commentary by the RBI Governor are dovish. The RBI has chosen to support the fledgling growth recovery and not preemptively panic on inflation trends. The GDP projections for FY23 at 7.8% and CPI projections at 4.5% are benign, supporting the no-change stance in this policy.
The RBI chose not to disturb market sentiments by keeping key policy rates and an ‘accommodative’ stance unchanged.
Policy unwinding is typically difficult amid contradictory goals of inflation, growth, support for the large Government borrowing program, and playing catch-up with the global rate tightening cycle. The market expectations were divided on a Reverse Repo rate hike to commence the policy normalization. However, the RBI smartly focused on managing the surplus liquidity via VRR (variable repo rate) and VRRR (variable reverse repo rate) auction without disrupting market yields further.
We believe April will be the appropriate window for action on the reverse repo.”
Anish Mashruwala, Partner, J Sagar Associates (JSA)
“The RBI MPC statement today underlined its supportive stance towards growth and revival to pre-pandemic levels, keeping in line with the recent Budget. However, while ensuring that there was positive messaging around growth and revival measures, the RBI did not lose sight of its inflation oversight and check and the announcement had calibrated caution to deal with any external shocks related to crude prices and the resurgence of any Covid variant. Accordingly while keeping policy and interest rates unchanged as per market expectations it was also emphasised that both core inflation and headline inflation were within tolerance limits and were being monitored. The announcement further stated that given the RBI measures and the outlook an accommodative stance on policy measures would also be possible in the near future indicating that a continued growth trajectory was being prioritised to bounce back from the pandemic. The announcement also recounted the success of various RBI action on the banking and non-banking industry during the pandemic as well as the actions to maintain liquidity. The announcement did keep the “icing on the growth cake” for last by announcing additional measures at the end. In particular the enhancement of the limits by Rs. 1 lakh crores to take the limit to Rs. 2.5 lakh crores for FPIs in the long term debt investment under the VRR route will be cheered by both domestic industry and foreign investors. The MSMEs were not left behind in the party with the increase in the settlement limits in NACH from the current Rs. 1 lakh crore to Rs. 3 lakh crores under the TReDs receivable discounting platforms for MSMEs. All in all today’s was a very positive announcement for a return to normalcy from the pandemic and as the Governor indicated that while protecting life remains the first priority in the wake of the pandemic, economic livelihood is also the rising focus in the list of priorities.”
Mohit Ralhan, Managing Partner of TIW Capital group
“RBI has maintained the accommodative stance prioritising economic growth and recovery amidst the global concerns on rising inflation. The good news is that inflation in India looks relatively under control with unchanged CPI inflation forecast of 5.3% for FY-22 and projection of 4.5% for FY-23. Inflation is expected to peak in the current quarter and ease in the second half of FY-23. Till the time inflation remains below RBI’s forecast, the focus will remain on supporting growth. Further, RBI has been proactively managing liquidity through VRRRs and there are no concerns on the liquidity side. Overall, the commentary on economic growth, increasing strength of PSU banks’ balance sheet, financial stability and liquidity is quite positive and RBI has reconfirmed its commitment to protect domestic markets from the impact of global macroeconomic events. The Indian market is expected to respond positively to RBI’s announcements.”
Sachin Agrawal, Co-founder & COO, Bizongo
"How MSMEs would benefit from the continued policy"
“Financial inclusion and technological transformation of MSMEs is now a priority. As of Q1 2020, MSMEs faced a credit gap of ₹16 lakh cores. In May 2020, when the repo rate was reduced to historic lows, India was just starting to confront the challenges of the pandemic era. In 2022, the primary challenges facing the Government and RBI, are that of uneven growth and inflation. This combination, if untamed, can lead to a double-whammy for MSMEs, especially for MSMEs producing price-sensitive products, such as textiles.
Global trade in 2021-22 was defined by fluctuating costs of commodities, materials, and logistics. In India, MSMEs had to confront the rising costs of inputs, and also ensure consistent demand for their products. This resulted in the inability of MSMEs to pass on these rising input costs. As part of the Budget, the Government has extended the term of the ECLGS with an additional corpus of ₹50,000 crores, and capped the surcharge from LTCG at 15%. More importantly, MSMEs are now permitted to use surety bonds, which has lowered barriers to access credit.
In this context, we welcome the RBI’s decision to maintain an accommodative stance with regards to the repo rate. A lower interest rate on loans will not only will it mean cheaper access to credit for MSMEs, it will also allow consumers to make larger purchases. These initiatives will enable MSMEs to invest their working capital for business requirements and growth, and not bridge credit deficits.”
Lakshmi Iyer, CIO (Debt) & Head Products, Kotak Mutual Fund
“The perfect V-day gift to bond markets was delivered on P-day today. No change in rates or stance is a big boost to sagging bond prices and a much needed respite. No major worries on inflation front as well. Fy 23 inflation forecasts at 4.5% also seems absolutely fine for yield. This coupled with the current liquidity situation calls for anchoring of bond yields and expect positive sentiment to revive in bond markets in near term.”
DRE Reddy, CEO and Managing Partner at CRCL LLP
"It is a welcome move to keep repo rate and reverse repo rates unchanged, reiterating an accommodative stance on both rates and liquidity. The economic growth momentum softens amid pandemic uncertainties, it was likely for RBI to keep the repo rate and reverse repo rate unchanged. The softening of food prices, improving prospects for food grain production and expected easing of vegetable prices on fresh winter crop arrival may give some relief. Increase in crude oil prices is one of the drivers of inflation though inflationary pressure is being set off by tax cuts relating to petrol and diesel. In line with the upcoming CPI expectation, we are hopeful to expect the easing of food prices to continue adding optimism while also ensuring a strong and sustainable economic recovery."
Rohit Poddar, Managing Director, Poddar Housing and Development Ltd
“The Reserve Bank of India's decision to keep the repo rate at 4% is a step forward on the road to economic recovery. The government has recognized the evident necessity to be the driving force behind economic recovery, and only then will the private sector contribute to this recovery by allocating capital to grow. The fact that overall economic activity is moving in the direction of stable inflation is encouraging and shows that the country's economy is blooming. While rising commodity prices have pushed up input material costs, the economy's low-interest-rate has been a key factor in the housing sector's revival. In comparison to last 2 years, we are in a lot better position as a consequence of the government's proactive initiatives, which have resulted in the country's economic fundamentals becoming more stable.”
Abhay Agarwal, Founder, and Fund Manager, Piper Serica, SEBI Registered Portfolio Management Service Provider
"It is quite reassuring for stocks that RBI has continued with an accommodative stance and kept the inflation estimate at its current level. It was highly expected that the reverse repo rate at least will be increased to reduce excessive liquidity but that has also been left at 3.35%. Clearly, RBI is more focused on protecting the nascent recovery rather than on increasing rates. This will fray a lot of nerves and will cool down the bond yields. The interest rate-sensitive stocks like banks, real estate, and autos will be the biggest beneficiaries. Overall very positive in an environment where rates are rising globally. With the omicron worry also behind us, we expect that some kind of reverse taper tantrum will play out in the Indian stock market."
Sonam Srivastava, Founder at Wright Research, SEBI Registered Investment Advisor
"The RBI surprised on the Dovish side by leaving the repo and the reverse repo rates unchanged. Most economists projected that the reverse repo would be increased, and the stance would change from accommodative to neutral. Still, the governor has undoubtedly kept the outlook accommodative and supportive for growth. As a result, the bond yields have fallen, and the bond markets are rallying, leading to market profits for the banks and banking and housing finance companies rallying. There is a cheer from the market in all quarters right now, which is a big positive, but with all major global central banks turning neutral from dovish, market participants would closely monitor this move by the RBI to see if they are falling behind the curve."
Shishir Baijal, Chairman and Managing Director, Knight Frank India
RBI continued Accommodative Stance to help economic growth
“At this critical juncture when the economy is just recovering from the instability caused by the third wave of pandemic, RBI’s decision to keep the policy interest rate unchanged is a welcome move. There are still lingering growth concerns in the economy and RBI’s accommodative monetary policy stance will be supportive of growth. The Housing market has been showing a healthy bounce back from the covid crisis and low interest rates will help in improving affordability and sustaining the growth momentum. The sustenance of housing market recovery will have a strong multiplier effect on overall economic growth”
Sandeep Bagla CEO TRUST Mutual Fund
“Economics is all about making choices. RBI has chosen to prioritise growth over inflation. Given the expansionary budget, high oil prices, and elevated inflationary expectations, market players were expecting the beginning of the rate hike cycle in India. In the US, economists are expecting the US Fed to raise rates between 5 to 7 times this calendar year. By keeping all key rates unchanged, RBI has displayed confidence that India can remain isolated from global monetary trends. RBI's average expectation of inflation at 4.5% in the FY22-23 is interesting. Bond yields should remain low given that they had risen in expectations of rate cycle reversal. RBI's status quo is a brave step, which could lead to an unpredictable reaction from the investor community in the longer run.”
Madhavi Arora, Lead Economist, Emkay Global Financial Services
"The MPC expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity. However, Prof Jayanth Varma’s dissent on continuation of accommodative stance for foreseeable future continues to keep MPC in split state. The possible hike in fixed reverse repo was a close call and it seems the RBI gauged that markets need to be assuaged over material tightening of financial conditions ahead as global dynamics change and decided to stay put.
The gradualist approach toward liquidity and rate normalization may be challenged by various global and domestic push-and-pull factors. Nonetheless, a huge bond supply in FY23 (even with upside surprise on tax revenues) will require the RBI’s invisible hand in a more visible fashion, implying return of a pre-committed GSAPs going ahead. An uncomfortable RBI may neutralize that with CRR hikes, albeit it will face some communication challenges. We note the macro adjustment owing to changing global and domestic dynamics has so far been borne by the rates market while the FX market has been resilient. Amid ultra-elevated term premia, India’s current real rates look reasonable vs. EMs, given the present crosscurrents. This could give some leeway to the RBI to conduct shallow normalization."Dhaval Ajmera, Director, Ajmera Realty & Infra India Ltd
He said, “RBI’s announcement to continue with its accommodative stance is a welcome move to revive and sustain growth and limit any disruption to economic activity. It is a clear signal that regulators have chosen growth over any other factor like inflation or even aggressive stance taken by global central bankers and policy makers. The Indian economy has weathered COVID Pandemic well and it will continue to be the fastest-growing economy in coming future. After a heavy-duty CAPEX budget by the government, MPC has provided room to remain accommodative, improving inflation outlook with continuous policy support warranted for a durable and broad based recovery. The real GDP growth projected at 7.8% for 2022-2023 and inflation targets are seen to be milder than expected. We welcome these measures as it will continue lower rate regime for industry in general and also focus on rate sensitive real estate sector. With this move, consumers and home buyers will continue to enjoy decade low interest rates prevailing from past few months and continue to drive robust demand for the sector.”
Nitin Shanbhag, Executive Group Vice President – Investment Products, Motilal Oswal Private Wealth
"Policy rates remaining unchanged indicates that RBI is more focused on domestic macro variables rather than tracking global central bank actions. While the US Fed has clearly indicated multiple rate hikes going forward to combat rising inflation, the RBI seems far more calibrated in approach given its own projection of domestic CPI peaking in Q4FY22 and moderating in FY23. On the external front, the projection of CAD at 2% of GDP is also positive. Although bond yields will take a breather for now, with the RBI continuing on the path to normalization, we maintain that the yield curve is likely to flatten going forward. Hence, for core fixed income allocation, a barbell approach i.e. having core allocation to high quality accrual oriented funds with short maturities (3-5 years), complemented by 20-30% allocation towards long maturity and high quality roll down strategies, would remain the preferred strategy."
Dr. Atul Goel, MD, Goel Ganga Group & President (Elect.), NAREDCO Pune
"The RBI objective must be attached to the growth as the past two years were significantly stressful for the country. The RBI policy review might be raising the reverse repo rate as per the suggestions of monetary policy committee, however the important part is to keep the price variation within check for the consumers. The expectation are around 15 to 20 basis points. But overall it would be the RBI way of handling the inflation limits is to be seen rather than the actual conditions prevailing in the country."
Ridhima Kansal, Rosemoore, Director
"The RBI's decision to maintain repo and reverse repo rates at current levels indicates their growth-oriented stance. While inflation continues to be on the higher side and the Indian economy has caught up on an upward growth trajectory after the pandemic-driven crisis, such an outlook by RBI indicates their positive and healthy outlook on the immediate future of the country's economy. No wonder, the resilience of the common man has helped and the central bank seconds it with its positive outlook reflected in the status quo of the monetary policy."
Abhay Agarwal, Founder, and Fund Manager, Piper Serica, SEBI Registered Portfolio Management Service Provider
It is quite reassuring for stocks that RBI has continued with an accommodative stance and kept the inflation estimate at its current level. It was highly expected that the reverse repo rate at least will be increased to reduce excessive liquidity but that has also been left at 3.35%. Clearly, RBI is more focused on protecting the nascent recovery rather than on increasing rates. This will fray a lot of nerves and will cool down the bond yields. The interest rate-sensitive stocks like banks, real estate, and autos will be the biggest beneficiaries. Overall very positive in an environment where rates are rising globally. With the omicron worry also behind us, we expect that some kind of reverse taper tantrum will play out in the Indian stock market.
Sonam Srivastava, Founder at Wright Research, SEBI Registered Investment Advisor
"The RBI surprised on the Dovish side by leaving the repo and the reverse repo rates unchanged. Most economists projected that the reverse repo would be increased, and the stance would change from accommodative to neutral. Still, the governor has undoubtedly kept the outlook accommodative and supportive for growth. As a result, the bond yields have fallen, and the bond markets are rallying, leading to market profits for the banks and banking and housing finance companies rallying. There is a cheer from the market in all quarters right now, which is a big positive, but with all major global central banks turning neutral from dovish, market participants would closely monitor this move by the RBI to see if they are falling behind the curve."
Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities
“The RBI remained dovish and continued to support growth as it kept policy rates and stance unchanged. We believe that it would have been opportune to start policy normalization with atleast a 20 bps hike in reverse repo without much of market impact. However, today’s policy risks sharper adjustments if inflation risks materialise. Inflation risks, especially from fuel prices, remains a concern and can materialize relatively soon. Compared to RBI estimates, we estimate FY2023 GDP growth 30 bps higher at 8.1% and FY2023 CPI inflation 50 bps higher at 5%. We believe it would be opportune to increase reverse repo rate hike by 40 bps in the April policy.”
Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research
"RBI has decided to reaffirm its existing accommodative stance and has not moved any of the benchmark rates including the reverse repo rates. It continues to highlight the risks from the pandemic and the impact of Omicron on the economy and has reinforced its bias for supporting the economic revival to the extent possible.
As regards support to the vulnerable sectors, RBI has decided to continue the on tap liquidity facility for contact intensive and health services sectors.
Overall, RBI has consciously taken a different stance on its monetary policy vis-à-vis the other key central banks by persisting with the accommodative stance on the expectation that inflation will remain relatively moderate in India till growth and demand signals become strong and durable."
Dr. Samantak Das, Chief Economist, and Head, Research and REIS, India, JLL
“RBI keeps growth a priority by keeping policy rates unchanged, sustained benefit for real estate”
"The policy of continuous support for sustained and durable growth is driving to maintain the status quo in repo rate at 4% as well as the reverse repo rate at 3.35%. Though the current inflation levels are elevated, it is expected to moderate over the next few quarters.
The Monetary Policy Committee (MPC) has unanimously maintained the ‘accommodative’ stance to give priority to GDP growth. This decision of MPC is extremely welcome for the Indian real estate sector."
Madhavi Arora, Lead Economist, Emkay Global Financial Services
"The MPC expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity. However, Prof Jayanth Varma’s dissent on continuation of accommodative stance for foreseeable future continues to keep MPC in split state.
The possible hike in fixed reverse repo was a close call and it seems the RBI gauged that markets need to be assuaged over material tightening of financial conditions ahead as global dynamics change and decided to stay put.
We note the macro adjustment owing to changing global and domestic dynamics has so far been borne by the rates market while the FX market has been resilient. Amid ultra-elevated term premia, India’s current real rates look reasonable vs. EMs, given the present crosscurrents. This could give some leeway to the RBI to conduct shallow normalization."
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services
"RBI has again voted for growth by continuing the accommodative stance and retaining the current repo and reverse repo rates. Even though this might invite criticism of the central bank being behind the curve, the RBI governor has categorically communicated that "continued policy support is warranted for a durable and broad-based recovery." This clear pro-growth stance is desirable at the current juncture.
Market has responded positively to the policy as of now with banking stocks exhibiting strength.However, the short to medium- term trend of the market is likely to be influenced by the inflation data in US expected late tonight."
Parth Nyati, Founder, Tradingo
"Contrary to many central banks, RBI acts dovish and kept interest rates unchanged with an accommodative stance. There were expectations that RBI may hike the reverse repo rate and may change its stance to neutral from accommodative in tandem with hawkish global central banks amid rising inflation but RBI continued with its existing stance. RBI believes that inflation will peak out soon and there is a need for continuous support to the economy. Generally, it is considered positive for the market but it will be important to see how the market will read it because there could be a risk that RBI will remain behind the curve that may cause inflation in the future however the overall structure looks bullish for Indian market after a recent correction. Rate-sensitive sectors like infra, real estate, auto, and financial may continue to outperform."
Anuj Puri, Chairman – ANAROCK Group
"Amid the ongoing impact of the Omicron variant of Covid-19 across the world and in India, RBI has once again decided to keep the repo rates unchanged at 4% and reverse repo rate at 3.35% while maintaining an ‘accommodative’ policy stance. This is the tenth consecutive time that the RBI maintained status quo amid the current uncertainties for continued growth.
The fact that the repo rates remain unchanged is good for home loan borrowers as the floating retail loan rates, which are directly linked to external benchmark repo rates, will continue at what are the lowest levels in the last two decades. A continuation of this low interest rate regime supports the overall environment of affordability for some more time and is very welcome.
While the window of opportunity for homebuyers to avail low interest rates has been extended for some more time, it is unlikely to prevail for much longer - sooner or later, repo rates will rise. Overall, this courageous and progressive stance by the RBI factors in real-time ground realities and flies in the face of industry expectations that the repo rates would be increased."
Dr. Esha Khanna, Assistant Professor, NMIMS SARLA ANIL MODI SCHOOL OF ECONOMICS
"RBI takes a bold stance and continues to stay accommodative amid muted demand in the economy. Extension of VRR and VRRR of 14-day tenor operations, hike in limit for inflows under Voluntary Retention Scheme alongside fine-tuning operations will ensure adequate liquidity and capital even for domestic debt market. However, RBI needs to stay guarded as the road ahead is bumpy with spit along with inflationary pressures and hawkish central banks across the globe leading to currency pressures."
- RBI extends by 3 months on-tap liquidity scheme for healthcare, contact intensive sector: Governor Das
- E RUPI digital voucher cap raised from Rs 10,000 to Rs 1 lakh and multiple-use permitted, says RBI Governor
- RBI would continue to insulate domestic economy from global spillovers: RBI Governor Das
- Logical to restore revised liquidity management framework to make it more flexible, agile: RBI Governor
- Overall system liquidity remains in large surplus, says RBI Governor
- RBI Governor exhorts banks to augment capital, improve risk management
- RBI Governor says real GDP growth of 9.2 per cent in FY22 will take economy above pre-pandemic level
- RBI projects CPI inflation at 5.3% for FY22 and 4.5% in 2022-23: Governor Das
-Hardening global crude oil prices present upside risk to inflation, says RBI Governor Das
- Some loss of economic momentum due to third pandemic wave; demand for contact intensive sector muted: RBI Governor
- Some loss of economic momentum due to third pandemic wave; demand for contact intensive sector muted: RBI Governor
- Inflation to peak in the current quarter with tolerance band, moderating in the second half of next fiscal: RBI Governor
- RBI keeps benchmark lending rate unchanged 10th time in a row at 4%
- MPC decides to raise keep reverse repo rate unchanged at 3.35%: RBI Governor
- The real GDP growth is projected at 7.8% for FY 2022-23: RBI Governor Shaktikanta Das
- India is charting a different course of recovery from rest of the world. India poised to grow at fastest pace year-on-year among major economies as per projections by IMF. This recovery is supported by large scale vaccination & sustained fiscal & monetary support: RBI Governor
- Pandemic hold global economy hostage: RBI Governor Shaktikanta Das
- Reserve Bank of India keeps repo rate unchanged at 4%, maintains an accommodative stance; the reverse repo rate remains unchanged at 3.35%
- RBI's Monetary Policy Committee (MPC) decides to continue with accomodative stance
- RBI's Monetary Policy Committee (MPC) keep rates unchanged.
Reserve Bank of India (RBI) Governor Shaktikanta Das is addressing LIVE to announce the policy resolution and six-member Monetary Policy Committee (MPC) meeting outcome.
- RBI Monetary Policy Announcements to begin shortly - Governor Shaktikanta Das to address LIVE at 10 AM on MPC meeting outcome
- If the RBI maintains status quo in policy rate today, it would be the tenth consecutive time since the rate remains unchanged.
- The central bank had last revised the policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.
- The MPC has been tasked by the government to keep inflation in the range of 2-6 per cent.
- Experts, however, are of the opinion that the MPC may change the policy stance from 'accommodative' to 'neutral' and tinker with the reverse-repo rate as part of the liquidity normalisation process.
- It is widely anticipated that the MPC is likely to maintain the status quo on the benchmark interest rate or repo rate.
- The meeting was to start on Monday but it was postponed by a day in view of Maharashtra declaring public holiday on February 7 to mourn the death of legendary singer Lata Mangeshkar.
RBI Monetary Policy Zee Business Poll: Results
Do you expect Repo Rate changes in this Policy?
-Yes : 0%
-No: 100%
Do you Expect Reverse Repo Rate changes?
-Yes: 35% (10-20 Bps)
-No: 65%
What's the quantum of hikes do you expect in CY22?
10Bps -15 Bps: 5%
15Bps-25 Bps: 25%
25Bps -50 Bps: 70%
Will RBI Continue Accommodative Stance?
-Yes: 85%
-No: 15%
If not this time, by when do you expect a hike in the repo rate?
hike from FY23?)
-Q1FY23: 90%
-Q2FY23 Onwards: 10%
Will RBI revise GDP Estimates?
-Yes: 70%
-No Change: 30%
Will RBI revise the CPI Estimates?
-Yes: 25%
- No Change: 75%
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