RBI Monetary Policy 2021: KEY HIGHLIGHTS, top 11 points by Governor Shaktikanta Das and reactions - who said what?

RBI Monetary Policy 2021: Reserve Bank of India on Wednesday expectedly left interest rates unchanged and maintained an accommodative stance as the economy faces a renewed threat to growth due to the resurgence of coronavirus cases. The central bank kept the benchmark repurchase rate unchanged at 4 per cent and maintained an accommodative policy stance to support growth.

RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) kept its estimate for economic growth unchanged at 10.5 per cent for the current fiscal. MPC saw inflation edging up to 5.2 per cent in the first half of the new fiscal from 5 per cent in the January-March period and moderate to 4.4 per cent in Q3 of FY22.

Here are the KEY HIGHLIGHTS of RBI Monetary Policy 2021 and top 11 points by Governor Shaktikanta Das:-

1 RBI maintains status quo fifth time in a row on policy rate; keeps repo unchanged at 4%

2 Central bank to maintain accommodative monetary policy stance to support growth, keep inflation at targeted level: RBI Guv

3 Recent surge in COVID-19 infections has created uncertainty over economic growth recovery, says RBI Governor.

4 Focus must be on containing spread of virus and economic recovery, says RBI Guv

5 RBI retains economic growth for 2021-22 fiscal at 10.5 per cent in 2021-22 fiscal's first monetary policy

6 Central Bank to ensure ample liquidity in system so that productive sector gets adequate credit

7 RBI to ensure orderly conduct of government borrowing; preserve financial stability

8 RBI will continue to do whatever it takes to preserve stability and to insulate financial firms from global spillovers

9 RBI announces Rs 50,000 cr additional liquidity facility to NABARD, NHB and SIDBI for fresh lending during 2021-22

10 RBI enhances aggregate ways and means advances limits to states to Rs 47,010 crore.

11 To tide over COVID crisis, RBI extends enhanced interim ways and means advances of Rs 51,560 crore to states till September.

REACTIONS: WHO SAID WHAT?

Dinesh Khara, Chairman, SBI

“The RBI policy statement is a clear commitment to assuage uncertainties in the market through guaranteed, continued liquidity support and explicit guidance to navigate through the current COVID surge, the duration of which is uncertain. This apart, permitting banks to co-lend through NBFC’s and bringing it under PSL guidelines will broad base lending. The enhancement of loan limits against electronic warehouse receipts will encourage lending for allied activities. Several steps undertaken in the realm of payment systems will give a fillip to digital adoption and competition. The idea of setting up a Committee to review the working of ARC’s could open up new vistas of faster resolution. Overall, the policy statement leaves a clear imprint on growth.”

A. K. Das, Managing Director & CEO, Bank of India

"Policy announcement represents a balanced approach to make economic revival deep rooted, ensure orderly development of financial market and keep price movement at manageable levels."

Dr. Rashmi Saluja, Executive Chairperson, Religare Enterprises Ltd.

"The first bi monthly monetary policy for FY22 is on expected lines as RBI kept Repo rate unchanged. The key takeaway is that the central bank has kept FY22 growth projection unchanged at 10.5% and exuded confidence that despite spurt in COVID cases, growth momentum can be sustained if the vaccination programme is speeded up and extended to wider segments of the population. Another highlight is the announcement of a comprehensive G Sec buyback programme from the secondary market, which will give much needed assurance to bond markets, keep yields under check and allow for smooth completion of government's huge borrowing plan. It is evident that RBI wants to ensure financial stability at all costs to support nascent recovery in economy and continue with its accommodative stance as long as required."

Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India

“The RBI has taken reassuring steps to infuse additional liquidity into the housing sector through the interventions of increased financing to National Housing Bank and extension of priority sector tag for bank funding to NBFCs for housing loans. 

However, given the inflationary concerns in recent months, RBI has maintained the status quo on key policy rates. At a time when rising second wave of COVID infections and subsequent lockdowns are derailing economic momentum, RBI interventions will help maintain adequate liquidity as well as prevent hardening of yields in bond market. These measures will ensure economic stability as well as keep real estate sector stay afloat during such precarious times. Hopefully, benign retail inflation on account of better monsoon and easing of crude oil prices, coupled with accommodative stance would translate into lowering of policy rate in near future.”

Naveen Kukreja - CEO & Co-founder, Paisabazaar.com 

"The MPC announcements to leave the repo rate unchanged and continue with its accommodative policy stance are as per our expectations. These should aid the fiscal efforts made by the government to boost economic revival. We also welcome the announcements made by the Governor to boost financial inclusion and credit flow to the housing and MSME sectors.

The extension of special refinance facilities to NABARD, SIDBI and NHB for up to 1 year should support credit flow and growth in the rural economy, housing sector and MSMEs. Similarly, the decision to extend the Priority Sector Loan (PSL) classification to loans lent by banks to NBFCs for on-lending to agriculture, MSME and housing segments till September 30, 2021 should increase credit flow to these segments and thereby, nurture the nascent growth impulses in these segments.  

The enhancement of maximum balance of accounts maintained with payment banks from Rs 1 lakh to Rs 2 lakh per individual customer should help in deepening financial inclusion and address the growing banking needs of account holders of payment banks. The proposals to make full-KYC Prepaid Payment Instruments (PPIs) mandatorily interoperable, increase their maximum balance to Rs 2 lakh and allow cash withdrawals through these instruments will further deepen the adoption of digital payment systems, especially in the smaller urban and rural centres. These steps will also create a level playing field for bank and non-bank PPI issuers."

Honeyy Katiyal, Founder-Investors Clinic

"The repo rate is being unchanged as I believe it is important to maintain the monetary accommodation at this point of time. It is an important step to enable the economic recovery to remain sustained.  With the second wave of Covid 19, the economic recovery looks uneven again and the speed of improvement might slow down after the sharp rebound from the lows. The rising cases of Covid across the country is again posing a challenge to the economy and the sectors all across. The continued repo rate accommodation is a good step."

Shiv Parekh, Founder - hBits

"The unchanged repo rate by RBI at 3.5% is a welcome step amidst the rising Covid cases in the country. RBI has kept the repo rate unchanged for the fifth consecutive meeting. India has been in a recovery mode from the Covid induced slowdown because of the strategic approach by RBI, to maintain liquidity, in the last one year. The second wave of Covid-19 is now threatening to a promising recovery. It appears that there will be no repo rate hikes before October. Some special attention should be paid to the real estate sector, especially commercial real estate, which significantly contributes to the country’s economic growth."

 

Anshuman Magazine, Chairman and CEO, CBRE India, South- East Asia, Middle East and Africa

“Maintaining a status quo for the fifth time, the RBI’s decision of keeping the repo rate unchanged at 4% is a welcome move which has been undertaken with the aim of ensuring economic revival, while ensuring that inflation remains within the target going forward. In addition to maintaining its accommodative policy stance, the Central Bank has also announced additional measures such as special liquidity facilities for all India financial institutions including INR 10,000 crore for the National Housing bank (NHB), timeline extensions of six months for banks on-lending to NBFC’s, constitution of a committee to comprehensively review the working of asset reconstruction companies (ARCs), extension of TLTRO On Tap scheme deadline by six months, amongst others. These measures are likely to assist the revival of the real estate sector while fast tracking economic recovery.”

Abheek Barua, Chief Economist, HDFC Bank

"The RBI policy was more dovish than expected with the central bank recognising the risks associated with the rising infection cases in the county and continuing its support for growth through a number of measures including its commitment to keep liquidity in surplus and an extension of measures like the on-tap TLTRO. Fears of any pre-mature tightening either through rates or liquidity management by some sections of the market have been put to rest by RBI’s dovish tone today. The governor was for instance categorical that the changes in liquidity measures announced today does not constitute tightening.

The focus of the policy was clearly on yield management and the announcement of the G-sec acquisition program (GSAP 1.0) is likely to stabilise and support long term yields. Although, the extension of tenures for the VRRR (variable rate reverse repo auctions) might lead to some hardening at the short-end of the curve. The upward revision of the inflation forecast by the RBI is justifiable given rising commodity prices, although we see further upside risks to the current forecast range. That said, inflation is unlikely to be an area of concern for the RBI for the coming months and growth is likely to remain the policy priority."

Sonam Chandwani, Managing Partner at KS Legal & Associates

"The Monetary Policy Committee (MPC), which is primarily responsible for fixing the interest rates in India, came up with the policy rates, which are to remain the same for the 5th consecutive time in a year. However, keeping the rates unchanged is not a sure guarantee to facilitate the path for regaining the potential that was lost due to the COVID-19 pandemic. The revival of the sectors depends on many dynamic factors, which are yet to be tackled. The status quo may however help RBI in its liquidity normalization plan. These monetary policies will also complement the existing fiscal policies and help it to meet the set objectives. Also believing that the inflation is at an ease, the central bank also views the GDP growth for the coming financial year at 10.5%. The committee’s decision can hence also be seen as a support to the growth of the same and to open up space for a variety of market operations."

 

Dhiraj Relli, MD &CEO, HDFC Securities

“The outcome of the MPC meet was on expected lines as far as repo rates and stance are concerned. However, the  announcement of secondary market G-sec acquisition programme (G-SAP 1.0), where the RBI will commit upfront to a specific amount of open market purchases of government securities with a view to enable a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions, was a positive surprise. This shows the resolve of the RBI to keep Gsec rates under check despite the large borrowing program. The endeavour will be to ensure congenial financial conditions for the recovery to gain traction. The large amounts committed in Q1 and in April show the seriousness of the RBI in implementing the Gsec program. 

The markets have reacted well to this measure as this will result in rates not rising and, in fact, easing down for businesses. The impact of the MPC announcements however will wither away in a couple of days time and the markets will keep responding to other triggers including Covid progress and corporate results.”

Lakshmi Iyer, CIO (Debt) & Head Products, Kotak Mutual Fund

“The RBI MPC voted for a status quo in line with our and market expectations. The move to introduce G-SAP – secondary market GSec acquisition program is a master stroke by the RBI. This would reign in sharp spike in GSec bond yields. Introduction of long term VRRR (variable rate reverse repo) is an extension towards normalising liquidity. Liquidity surplus however will and is likely continue. We expect yield curve to flatten from the current levels with the longer end of the yield curve compressing faster than the short end.”

Mohit Ralhan, Managing Partner and Chief Investment Officer, TIW Private Equity

"RBI has maintained the accommodative stance indicating that the primary focus area is growth and economic recovery. It is an extremely positive step especially confirming the continuation of accommodative instance till the time it is required to support the growth. The G-Sec acquisition program is also quite significant to ensure cooling off of bond yield and financial stability given the global uncertainty around the risks related to COVID-19. RBI has demonstrated sustained commitment to growth and maintaining adequate liquidity in the financial system, which augurs well for the coming year. Recently, the markets have been under pressure, primarily due to rising cases of COVID-19 and RBI’s policy announcements today can give it a fresh impetus." 

G Murlidhar, MD & CEO, Kotak Mahindra Life Insurance

 “The Reserve Bank of India (RBI) has assured markets of continuation of its accommodative, growth-supportive stance till growth trajectory is on a firm footing. The monetary policy committee (MPC) sees upside risks to inflation driven by higher commodity prices balanced by downside inflation risks due to Covid’s second wave. To moderate the large systemic liquidity surplus, RBI has decided to conduct longer tenor variable rate reverse repo operations. Additionally, in order to ensure orderly evolution of yield curve, RBI has announced a secondary market bond purchase of Rs. one lakh crore during the first quarter of FY22. We expect, given the high uncertainty around near term growth prospects, MPC will remain accommodative at least through the first half of FY22.”

Anagha Deodhar – Chief Economist, ICICI Securities 
 
"The MPC’s decision to pause and maintain accommodative stance is along expected lines. However, it retained GDP growth projections for FY22 at 10.5% despite large stimulus in other countries and its potential impact on global growth. In this policy, the biggest announcement was GSAP 1.0 under which the RBI plans to buy government securities worth Rs 1trn in Q1FY22. Along with GSAP, the RBI also announced extension of several liquidity facilities. Together, these measures are aimed at keeping financial conditions benign, ensure orderly evolution of the yield curve and supporting the nascent recovery."

Bekxy Kuriakose, Head – Fixed Income, Principal Asset Management 

 “All members of RBI MPC decided to keep key rates unchanged and stance as accommodative and pledged to continue to sustain growth on durable basis. Some concern has been expressed on input cost pressures which can feed into inflation particularly commodity prices and logistic risks. However overall RBI indicated that there are both downward and upward pressures on inflation reflecting their stance that they likely do not see inflation as a major concern. In this backdrop the continuation of the FIT (flexible Inflation targeting) Regime for next 5 yrs is also seen as a validation of its success since past five years and gives a good measure of policy continuity. 

For the markets, the most positive announcement from the Policy was the announcement of G-SAP 1.0 signalling a move towards a more structured and orderly manner of conducting open market secondary purchases of government securities. For the first quarter of FY 22, Rs 1 lakh crore worth of purchases has been announced and an amount of Rs 25,000 cr next week itself. Thus market is now assured of regular open market operations. This bodes well for medium to long end government securities which has already seen some softening in yields today post the announcement. Other measures including extension of TLTRO on Tap scheme, Liquidity facility for all India Financial institutions, extending the PSL classification for lending by banks to NBFCs for onward lending to certain sectors and continuation of enhanced WMA (ways and means advances) limit for State governments will help to continue to provide relief in wake of renewed concerns on growth amid a surge in COVID cases.

Overall the policy is dovish and remains focused on maintaining orderly yield curve conditions as well as extending support to needy sectors. 

We recommend investors to continue to have a balanced asset allocation mix in high quality short term and medium duration debt funds.”

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory

"The RBI and especially the MPC needs to be commended for maintaining its accommodative stance for more than a year now. It’s approach, towards tackling the situation created by the pandemic and steps taken to help revive the economy, will go down in History as being one of the finest. Keeping in mind the resurgence of COVID infections across the country, a slight reduction in the key rates would have been widely celebrated. With the temporary reduction in transaction costs being withdrawn, in states like Maharashtra, the expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels."

Bhushan Nemlekar, Director, Sumit Woods Limited  

"The RBI's decision to maintain its accommodative stance was on the expected lines in light of the recent resurgence of Covid-19 infections and its potential to cause the on-going economic recovery to stumble. The prevailing low home loan rates are already enticing for homebuyers. It's a high time bank needs to pass on the benefits to the homebuyers. With auspicious occasions like Gudi Padwa and Akshaya Tritiya already round the corner, the real estate sales are expected to be further driven by developer discounts and flexible payment plans."

Shraddha Kedia-Agarwal, Head - Marketing & Sales, Transcon Developers

"RBI maintaining status quo on key policy rates was expected given the inflationary concerns in recent months. The low interest rates for the last few months has already given a boost to the real estate sector upticking the demand in the last few quarters and enhancing the confidence of the homebuyers. The decision will help to sustain liquidity for some period as we are already witnessing the derailment of economic momentum due to the current wave of Covid-19 pandemic and lockdowns in different parts of the country. It will also help in sustaining economic stability as well as keep the real estate sector stay afloat during these unprecedented times."

Anuj Khetan, Director, Vijay Khetan Group  

"Keeping in mind the recent surge in the COVID-19 cases and the restrictions imposed, the monetary policy committee’s decision to keep key rates unchanged at 4% was on expected lines. This move is a much-appreciated step recognizing the role of the real estate sector in generating employment and economic activity. The Union Budget 2021-22 also has provided a strong impetus in favour of the real estate sector. With the interest rates at a record low, the Government will continue taking affirmative measures as long as it is necessary to revive the economy and mitigate Covid-19 impact. With stamp duty reversed back to 5% and real estate sales on the upside, it would boost the banks to further transmit interest rate reduction to end-users to provide further more incentive to renters to eventually turn into homeowners." 

Himanshu Jain, VP - Sales, Marketing and CRM, Satellite Developers Pvt. Ltd. (SDPL)

"We anticipated the monetary policy committee (MPC) to keep the repo rate unchanged at 4% and retained the accommodative stance that will still continue to serve the markets well. Some strong liquidity measures were announced in the past quarters and are expected to continue. The earlier announcements by the state government of stamp duty reduction along with reduction on premiums for developers surely gave a boost to the ailing sector and created demand among the homebuyers and we hope such announcements are made in the future as well as the pandemic situation continues."

Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty, Hon. Secretary, CREDAI MCHI

"Given the surge in COVID19 cases and intermittent lockdowns across major cities, we thank the RBI for continuing with their accommodative stance.
We further urge the RBI to take immediate action to arrest the deteriorating health of MSMEs caused due to the regular stop-start nature of business activities and increasing input costs which are having a catastrophic impact on the survival of these businesses."

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Co. Ltd.

“Overall an extremely Dovish and Pragmatic Policy focused on Growth. MPC has stayed on course despite a tight ropewalk of balancing ‘the Incumbent Growth and inflation dynamics’, especially at a time when the spectre of surging Covid 19 cases and the resultant uncertainty had clouded the markets. MPC has reassuringly tried to assuage the markets by re-emphasizing its commitment to keeping policy accommodative with a shift to ‘state based guidance’ and maintaining ample liquidity. A shot in the arm was giving the antidote to the bond markets in the form of announcement of an explicit OMO - GSEC purchase calendar, which should put to rest the mounted apprehensions of demand supply mismatch in the bond markets. MPC has rightly continued to stay cautious and vigilant and not react to the incumbent global and domestic pressures beckoning for maneuvering of the monetary policy”
Riaz Maniyar, Co-founder, YieldAsset Real Estate Tech Pvt Ltd

"The decision by RBI to maintain the repo rate status quo will make sure that cost of borrowing will not harden soon. However, a further cut in the key rates would have given a boost to current demand uptick for real estate . The low-interest rates have started impacting the property markets in a positive way as maintaining low finance costs is critical for a sustainable recovery in the real estate sector and enhancing confidence in home buyers. A wave of spending by the government across sectors has also set the stage for years of high growth of the economy which will in-turn influence real estate too. While the government has taken some initiatives to uplift the sector in the past few months by introducing stress funds and stimulus packages, more reforms are required to propel the growth of real estate sector."

Mahendra Jajoo, CIO fixed income, Mirae Asset Investment Managers.

"Much on the expected lines MPC reiterated its stance of maintaining accommodative policy as long as it takes for a sustainable recovery to shape up. In a direct measure to address the concerns on large supplies, RBI announced a G-sec acquisition program wherein RBI has given calendar as to the quantum and the time period in which it will buy g-secs from the secondary market. While this is likely to keep the market supported, governor did voice out slight concern on inflation backed by rising commodity prices and expectation of monsoon this year. Following which it marginally raised inflation expectation to 5.2% from the previous estimate of 5.0% for the next two quarters. With global market yields also stabilizing after falling from recent highs, bond yields are expected to remain range bound with a slight easing bias in coming months."

Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group

"While the real estate industry always aspires for reduced interest rates, the decision of RBI to keep the repo rate unchanged is understandable at this juncture and will make sure that home loans will continue to remain at attractive rates and this should augur well for home buying sentiment. Residential demand is reviving in the pandemic context and this needs to be fostered.  A further cut in the key rates would have given a boost to current demand uptick that we have seen recently. Our country is recovering fast from the Covid-induced slowdown due to revival in domestic consumption – which has greatly benefitted from the benign interest rate regime, infusion of liquidity as well as stable returns of real estate investment compared to other investment instruments. The International Monetary Fund (IMF) has projected an impressive 12.5 per cent growth rate for India in 2021, stronger than that of China which augers well for real estate sector too. As the economy is gradually opening up and getting back on track to restore the lost momentum, we feel that special attention should be paid to the real estate sector which contributes significantly to the country's economic growth."

Raghvendra Nath, Managing Director, Ladderup Wealth Management

“The RBI governor continued to instill the markets with confidence and is cognizance of the uptick in yields and is taking various measures to contain the volatility. The measures to execute the TLRO effectively in order to flatten the yield curve was taken positively, also Liquidity support of Rs 50,000 crore to be provided to NABARD, NHB and SIDBI should promote priority sector lending. RBI is also indirectly expanding liquidity with increase in ‘ways and means advances’ for States and UTs by 46% to Rs.47,100 crores which is generally done to help them tide over temporary mismatches in the cash flow of their receipts and payments. All of these decision will help in surplus liquidity in the monetary system and should support growth in the near term.”

Sandeep Bagla, CEO, TRUST Mutual Fund 

"Interest rates are likely to remain range bound going forward as RBI is committed to ensure easy liquidity and low repo rates. The increase in Government borrowings are likely to be partially offset by RBI OMOs and secondary market purchases of Government securities. Inclusion of government securities global bond indices will add to the demand. Corporate bond spreads are likely to remain at moderate levels on back of restrained supply and continued demand from institutional investors. Unless inflation expectations start increasing in the future, fixed income investors will do well to remain invested in Indian bonds."

Himanshu Jain, VP - Sales, Marketing and CRM, Satellite Developers Pvt. Ltd. (SDPL)

"We anticipated the monetary policy committee (MPC) to keep the repo rate unchanged at 4% and retained the accommodative stance that will still continue to serve the markets well. Some strong liquidity measures were announced in the past quarters and are expected to continue. The earlier announcements by the state government of stamp duty reduction along with reduction on premiums for developers surely gave a boost to the ailing sector and created demand among the homebuyers and we hope such announcements are made in the future as well as the pandemic situation continues."

Bhushan Nemlekar - Director, Sumit Woods Limited

"The RBI's decision to maintain its accommodative stance was on the expected lines in light of the recent resurgence of Covid-19 infections and its potential to cause the on-going economic recovery to stumble. The prevailing low home loan rates are already enticing for homebuyers. It's a high time bank needs to pass on the benefits to the homebuyers. With auspicious occasions like Gudi Padwa and Akshaya Tritiya already round the corner, the real estate sales are expected to be further driven by developer discounts and flexible payment plans."

Amar Ambani, YES SECURITIES

“With Bond markets pricing in a status quo well in advance, MPC barely surprised in terms of accommodative stance. All the members of the MPC unanimously voted for no change in policy rates. The central bank reiterated its FY22 real GDP growth projection of +10.5%, while sees inflation trajectory to hover around 5% in H1 FY22. RBI vehemently articulated that that absorption of excess liquidity through reverse repo should not be construed as reversal of accommodative policy stance. RBI governor expressed the need for orderly evolution of yields and will initiate 1 trillion of OMOs during Q1 FY22 to combat extreme volatility. RBI’s liquidity support will certainly help in assuaging market apprehensions given that supply of G-Sec paper will remain elevated on the back of frontloading of market borrowing. For FY22 as a whole, OMO operations are expected to be above INR 3 trillion, similar to FY21 level. Possibility of inclusion of Indian G-secs in the global bond indices will also absorb the supply. Nevertheless, we expect 10year yields to inch higher, possibly trade in the range of 6.2-6.25% in the near term, as there are concerns over stubborn core inflation, resurgent COVID infections, renewed localized lockdowns and relatively higher sovereign yields in US. 

Additional measures announced that are positive for smaller HFCs, NBFCs and MFIs were on-tap TLTRO scheme extended by 6 months and additional liquidity support of 500 billion to AIFIs. Key beneficiaries of these measures could be Can Fin, Repco, Home First, Shriram City and MFIs like CREDAG and Spandana.”

Anuj Khetan, Director, Vijay Khetan Group  

"Keeping in mind the recent surge in the COVID-19 cases and the restrictions imposed, the monetary policy committee’s decision to keep key rates unchanged at 4% was on expected lines. This move is a much-appreciated step recognizing the role of the real estate sector in generating employment and economic activity. The Union Budget 2021-22 also has provided a strong impetus in favour of the real estate sector. With the interest rates at a record low, the Government will continue taking affirmative measures as long as it is necessary to revive the economy and mitigate Covid-19 impact. With stamp duty reversed back to 5% and real estate sales on the upside, it would boost the banks to further transmit interest rate reduction to end-users to provide further more incentive to renters to eventually turn into homeowners." 

Nish Bhatt, Founder & CEO, Millwood Kane International

"“The status quo on key rates and the Accommodative policy stance by the MPC was on expected lines, it has been so for almost a year now to support the economic recovery. RBI's intent to continue with easy monetary policy till growth picks up pace, GDP, and inflation trajectory despite COVID-related disruptions is a positive development. Though RBI’s view on inflation will have a bearing on the rupee performance in the near term. The economic activity is normalizing in spite of a surge in new cases till now but the second wave of COVID19, its impact on economic activities, rising inflation, and bond yields may pose a risk to growth going forward.”
Rajee R, Chief Ratings Officer, Brickwork Ratings

"In line with BWR expectations, RBI has kept rates unchanged and retained its accommodative stance till growth is secured. Extending TLTRO for six months, introducing secondary market   G-sec acquisition Program 1.0 and the Rs 50,000 crore liquidity injection to the financial institutions, which includes Rs 10,000 crore to NHB,  are positive developments. These are expected to sustain a balanced liquidity and keep the borrowing momentum buoyant in the markets.  Given the renewed uncertainty in the economy, the MPC announcements provide reassurance of preserving adequate liquidity, protecting financial markets from external vulnerabilities and preventing the hardening of yields in the bond market.  Providing state-based guidance rather than time-based guidance given the current scenario is practical.  The formation of a Committee to review the functioning of Asset Reconstruction Companies (ARCs) and recommend measures to enable realisation of their full potential to meet the growing requirements of the financial sector has  come at  the right time. We expect the RBI to continue with the current stance till the economy recovers from the instability caused by the pandemic. "  

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. Guidance has become more open-ended and state-based amid new uncertainties and evolving nature of the economy, stating policy stance will remain accommodative till growth recovers sustainably. On macro parameters, the inflation forecast for 1HFY22 has been raised very mildly, FY22 inflation forecast is now at 4.9-5.0%, with risk to inflation forecast looking mostly balanced with strong food production output and to be countered by possible cost push pressures. The FY22 real GDP growth projection unchanged at 10.5% with minor downward revision in 1QFY22. The bigger move was with regards to yield management as RBI tries to break the negative loop of liquidity (mis)communication and sovereign premia. The RBI stressed on smooth liquidity management and orderly Gsec borrowings, with a more vocal and defined secondary market GSAP 1.0 (Gsec acquisition program) to be read largely as an OMO calendar with secondary purchases worth Rs 1tn in 1QFY22. This could lead to much lower sovereign risk premia ahead amid elevated borrowing calendar this year. We reckon the RBI will continue to strive fixing artificially skewed yield curve and maintain its preference for curve flattening. This is further re-established by the RBI’s re-instation of longer term VRRs, albeit again emphasising it should not be read as liquidity smoothening and not liquidity tightness. We expect the RBI to get more accountable and action oriented as we move into FY22. After all, a lower welfare cost of public debt may be needed when public funds are used for investments addressing growing economic externalities. We see net OMO purchases to the tune of Rs4.5-5tn in FY22 amid elevated supply, some natural normalization of liquidity in FY22 and shifting out of banks SLR demand."

 

Annuj Goel, MD, Goel Ganga Developments 

“In the aftermath of the Coronavirus pandemic, the Reserve Bank of India (RBI) has announced the first bi-monthly monetary policy of 2021-22 fiscal. Acting on the expected lines, the RBI has kept the benchmark policy rates or Repo rates unchanged. The Monetary Policy Committee seems to wait for some more time before employing any drastic measure to augment economic growth. Experts are of the view that the RBI will continue with the accommodative stance in the forthcoming months.
On February 5, 2021, the RBI, headed by Governor ShaktikantDas had kept the key interest rate (Repo) unchanged. The apex bank had sought inflationary concerns behind maintaining the status quo. The present policy recommendations have been announced after a three-day meeting by the Monetary Policy Committee.”

Kumaresh Ramakrishnan, CIO-Fixed Income, PGIM India Mutual Fund 

"The first bi monthly monetary policy for fiscal 2022, kept a status quo on all key policy rates, The MPC also reiterated an “accommodative stance” on rates and “surplus liquidity” to help the economy return to a durable growth path.

Key measures include a quarter wise OMO calendar, that should help manage the yield curve and the massive borrowing program, with INR 1 trillion scheduled in Q1-FY 22. RBI expects inflation to rise marginally in FY 22 though expects food inflation to soften. 

The policy is supportive of long end rates, with some impact at the shorter end owing to longer tenor liquidity absorptions as part of the liquidity management program. We would continue focusing on Banking & PSU, Corporate Bond and Dynamic Bond fund categories, post today’s policy."

Mahendra Jajoo, CIO fixed income, Mirae Asset Investment Managers.

"Much on the expected lines MPC reiterated its stance of maintaining accommodative policy as long as it takes for a sustainable recovery to shape up. In a direct measure to address the concerns on large supplies, RBI announced a G-sec acquisition program wherein RBI has given calendar as to the quantum and the time period in which it will buy g-secs from the secondary market. While this is likely to keep the market supported, governor did voice out slight concern on inflation backed by rising commodity prices and expectation of monsoon this year. Following which it marginally raised inflation expectation to 5.2% from the previous estimate of 5.0% for the next two quarters. With global market yields also stabilizing after falling from recent highs, bond yields are expected to remain range bound with a slight easing bias in coming months."

Mohit Ralhan, Managing Partner and Chief Investment Officer, TIW Private Equity

"RBI has maintained the accommodative stance indicating that the primary focus area is growth and economic recovery. It is an extremely positive step especially confirming the continuation of accommodative instance till the time it is required to support the growth. The G-Sec acquisition program is also quite significant to ensure cooling off of bond yield and financial stability given the global uncertainty around the risks related to COVID-19. RBI has demonstrated sustained commitment to growth and maintaining adequate liquidity in the financial system, which augurs well for the coming year. Recently, the markets have been under pressure, primarily due to rising cases of COVID-19 and RBI’s policy announcements today can give it a fresh impetus." 

Dr M Govinda Rao, Chief Economic Advisor, Brickwork Ratings

“The decision to hold the policy rates by the Monetary Policy Committee (MPC) is on expected lines. While maintaining the status quo, the Committee has continued with an accommodative policy stance. It has not provided the guidance for the future but has clearly stated that the accommodative stance will continue until the economy recovers.  The tone of the policy was dovish and accommodative, and the statement that the RBI will do whatever it takes towards recovery clearly shows that the focus is to help in sustaining the growth recovery and financial stability. Though there was no clear forward guidance on the recovery front, RBI maintained its FY22 growth forecasts at 10.5%, highlighting the renewed concerns owing to the second wave of Covid infections. The decision to purchase government securities amounting to Rs. 1 lakh crore is to ensure adequate liquidity to keep the yields in check.  The RBI’s CPI forecast too is well within the upper band of the flexible target. We expect RBI to continue with its current policy stance for H1 FY22 and may gradually start withdrawal of liquidity later in the year”.

 

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Co. Ltd.

“Overall an extremely Dovish and Pragmatic Policy focused on Growth. MPC has stayed on course despite a tight ropewalk of balancing ‘the Incumbent Growth and inflation dynamics’, especially at a time when the spectre of surging Covid 19 cases and the resultant uncertainty had clouded the markets. MPC has reassuringly tried to assuage the markets by re-emphasizing its commitment to keeping policy accommodative with a shift to ‘state based guidance’ and maintaining ample liquidity. A shot in the arm was giving the antidote to the bond markets in the form of announcement of an explicit OMO - GSEC purchase calendar, which should put to rest the mounted apprehensions of demand supply mismatch in the bond markets. MPC has rightly continued to stay cautious and vigilant and not react to the incumbent global and domestic pressures beckoning for maneuvering of the monetary policy”

Amit Gupta, MD, SAG Infotech:

"Our honourable RBI governor had said it right as it would be uncertain to say anything about economic recovery at this point of time especially concerned with the fresh covid spread. Apart from it, RBI has kept almost each & every rate unchanged and I would say it as a wise decision as all the rates were decided on deep research at the time of the previous year's covid outbreak and now they had not wasted time in again recalibrating the tax rates. While, RBI extending end of day balance to 2 lakh, NEFT to digital payments intermediaries, its optimistic view on mfg firms, urban demand and loosening its monetary policies have really helped a lot to the economy."

Raghvendra Nath, Managing Director, Ladderup Wealth Management

“The RBI governor continued to instill the markets with confidence and is cognizance of the uptick in yields and is taking various measures to contain the volatility. The measures to execute the TLRO effectively in order to flatten the yield curve was taken positively, also Liquidity support of Rs 50,000 crore to be provided to NABARD, NHB and SIDBI should promote priority sector lending. RBI is also indirectly expanding liquidity with increase in ‘ways and means advances’ for States and UTs by 46% to Rs.47,100 crores which is generally done to help them tide over temporary mismatches in the cash flow of their receipts and payments. All of these decision will help in surplus liquidity in the monetary system and should support growth in the near term.”

Ramani Sastri - Chairman & MD, Sterling Developers Pvt. Ltd.

"With the role of the real estate sector in generating employment and economic activity, one would usually expect RBI to cut repo rates in order to boost consumption. It also goes without saying that the real estate industry's perennial hope is fixed on lower interest rates. Any further reduction of the repo rate would have aided in ensuring adequate flow of capital in the market. However, home loan interest rates have already gone down substantially over the last year, and are presently at an all-time low. Homebuyers will continue to take advantage of the lowest ever home loan interest rates and with the emerging need, the demand for housing is going to sustain and many fence-sitters will take the plunge and make the purchase. With improved GDP growth estimated in the near future, we expect that the real estate sector will contribute a substantial share to overall economic development."

Ankush Kaul, President (Sales & Marketing) - Ambience Group 

“Home loan interest rates in India have been the lowest in the past couple of years and this has led to a significant recovery in transactions in all classes of housing -  affordable, mid segment  and luxury. As the apex bank has kept the rates unchanged, we expect housing demand to continue its upward trajectory in 2021, and the overall positive economic indicators shall further help home buyers to close and finalize."

Rohit Poddar, Managing Director, Poddar Housing and Development Ltd 

“The first RBI policy of FY’22 with its continued accommodative stance to maintain liquidity surplus in the market can be viewed as being pragmatic. Though the RBI moves away from time-based guidance, it has prudently provided timelines to its liquidity-focused measures providing cushioning to the financial markets.

The equity markets will cheer with the announcement on RBI’s Government Securities Acquisition Programme. This will ensure government borrowing at a low cost and be able to address pandemic-related adversities from both economic and healthcare aspects.

From a real estate point of view, an additional Rs.10,000CR for NHB for fresh lending will create a seamless environment to sustain the business operation. As a major part of credit borrowing happens from NBFCs in the real estate sector, the extension provided till 30th September will boost liquidity even further.”