RBI monetary policy: Experts welcome accommodative stance, hope for economic revival

RBI monetary policy: The industry experts have welcomed Reserve Bank of India's decision to maintain accommodative stance while keeping the repo rate same in its Monetary Policy Committee (MPC) meeting headed by Governor Shaktikanta Das. The move should help in keeping the inflation in check and revive growth, believes Thomas John Muthoot, CMD, Muthoot Pappachan Group.

"While RBI has kept the repo rate unchanged at 5.15% along with maintaining an ‘accommodative’ stance, this is being done to keep the inflation in check and revive growth. The CRR relief for automobile, housing and MSME loans is definitely a noteworthy point amidst the liquidity concerns in the market and this will help the lenders to lower their cost of deposits, ultimately transferring the benefit to the consumers," he said.

He added that the external benchmarking of the interest rates being extended to medium enterprises will improve the lending scenario in the market.

The six member-Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das, for the second meeting in a row, kept repo rate unchanged at 5.15 per cent but maintained the accommodative policy stance which implies it was biased in favour of cutting rate to boost growth. It also kept the GDP growth rate unchanged for the current fiscal at 5 per cent and projected a pick up in growth to 6 per cent in the next financial year.

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"Economic activity remains subdued and the few indicators that have moved up recently are yet to gain traction in a more broad-based manner. Given the evolving growth-inflation dynamics, the MPC felt it appropriate to maintain status quo," the MPC said.

The decisions taken by MPC suggest that the committee recognizes that there is policy space available for future action, said Sudhakar Shanbhag, Chief Investment Officer, Kotak Mahindra Life Insurance Company Ltd.

"The path of inflation is, however, elevated and on a rising trajectory through Q4:2019-20. The MPC decided to persevere with the accommodative stance as long as necessary to revive growth, while ensuring that inflation remains within the target. The RBI also announced some measures to boost the real estate sector. To boost consumer home and auto loans, for the next six months, banks will be will be allowed to deduct the equivalent of incremental credit disbursed by them as retail loans from their net demand and time liabilities (NDTL) for maintenance of cash reserve ratio," he said.