RBIThe decision to keep the repo rate unchanged for the fifth consecutive time is in line with the economic need to encourage growth, financial market participants and experts said on Wednesday.
In its first monetary policy announcement for this fiscal year, the Reserve Bank stressed the need to support the economy given the current situation amid an upsurge in Covid cases in the country.
The six-member Monetary Policy Committee (PMC) has unanimously decided to maintain the accommodative stance for as long as needed to support growth on a sustainable basis and continue to mitigate the impact of COVID-19 on the economy.
Rajiv Sabharwal, Managing Director and CEO of Tata Capital, said: “Growth forecasts appear to be encouraging and the dynamics of economic activity will be further consolidated. “
Apex Bank has projected the Indian economy to grow 10.5% in the current fiscal year.
Mihir Vora, director and chief investment officer, Max Life Insurance, said the measures announced are aimed at lowering borrowing costs, easing financial conditions and maintaining liquidity favorable to credit underwriting. The announcement raised concerns about any early withdrawal of cash, he added.
On the inflation front, the RBI forecast that retail price inflation would be in the 4.4 to 5.2 percent range during this year, with the first half falling into the upper range of more than 5 percent.
Rumki Majumdar, Economist at Deloitte India, said: “As expected, the RBI has kept key rates stable and will likely continue to keep them stable as there are significant inflation risks. Intermittent supply side disruptions and a gradual recovery in demand will keep prices under pressure. “
The RBI has provided more liquidity to MFIs to encourage lending to rural sectors and SMEs, Majumdar said, adding that credit growth needs to take off quickly to ensure investment spending and sustainable spending in all segments of the business. ‘economy.
To fuel the still nascent growth impulses, the RBI has found it necessary to support the continued flow of credit to the real economy.
Thus, liquidity support of Rs 50,000 crore for new loans during 2021-2022 will be provided to all Indian Financial Institutions (AIFI).
The RBI will also provide Rs 25,000 crore to NABARD, Rs 10,000 crore to NHB and Rs 15,000 crore to SIDBI. Notably, special refinancing facilities of Rs 75,000 crore were provided to AIFIs from April to August 2020.
In addition, the RBI also announced a program to acquire government securities of Rs 1 lakh crore (G-sec), named G-SAP 1.0, under which it will commit from the outset to a specific amount of purchases of G-sec on the open market as a measure of liquidity.
The announcement of the highly anticipated GSAP 1.0 is expected to go a long way to allaying concerns in the bond market over the size of the central and state government borrowing program for fiscal year 2022, N Sivaraman, MD and Group CEO, ICRA Ltd, noted.
“Regardless, global factors such as yields on US Treasuries and commodity prices, and the impact of these on domestic inflation, will influence returns. We expect the 10-year G-sec yield to be between 6.05 and 6.15% over the next two months, ”he said.
The rating company also suggested that the forecast for CPI inflation of around 5% in FY22 appears to rule out rate cuts, unless economic activity is severely disrupted by the wave. undergoing Covid-19.
Anshuman Panwar, co-founder of Creditas Solutions, said the first bi-monthly policy for fiscal 22 was as expected, with the RBI keeping the repo rate unchanged but reaffirming its commitment to maintain an accommodative stance.
“In addition, RBI will now set up a committee for a full review of ARCs from asset rebuilding companies. I believe this is an essential step in harnessing the full potential of ARCs so that the problem key to large bad loans is dealt with in a sustained and holistic manner. This is also crucial as economic growth is picking up and banks need the confidence to lend aggressively, “he added.
Dhruv Agarwala, CEO of the group, Housing.com, Makaan.com and Proptiger.com, said the RBI’s decision to keep policy rates unchanged was in line with expectations and hopes the regulator will closely monitor the COVID-19 situation as it evolves and change its position later in the day. exercise as needed.
Rashmi Saluja, Executive Chairman, Religare companies, said: “The main takeaway is that the central bank kept the FY22 growth projection unchanged at 10.5% and exuded confidence that despite the surge in COVID cases, the growth momentum can be maintained if the vaccination program is accelerated… It is obvious that RBI wants to ensure financial stability at all costs to support the emerging recovery of the economy and to continue its accommodating position as long as necessary. ”
George Alexander Muthoot, Managing Director, Muthoot Finance said the RBI’s liquidity measures along with bank loans to NBFCs extended through September 30, 2021 are recognition of the consistently important role NBFCs have played in lending to the last mile.
“Given the high uncertainty surrounding the near-term growth outlook, the MPC will remain accommodating at least until the first half of fiscal 22,” said G Murlidhar, Managing Director and CEO of Kotak. Mahindra Life insurance.
V Swaminathan, CEO of Andromeda & Apnapaisa, said: “The RBI has maintained a standstill on interest rates and continues to adopt an accommodative monetary policy.”
With the uncertainty surrounding the economy as the coronavirus rises across the country, the accommodating vision would help balance in terms of sustained growth without sacrificing the dual purpose of containing inflation, Swaminathan said.
Viral Sheth, Financial Controller – Tirelirex Finance Ltd, said: “The RBI has maintained an accommodative policy and kept policy rates unchanged as expected given increasing risks to growth due to second wave Covid infections and inflation driven by the increase commodity prices. Apex Bank is expected to maintain an accommodative policy as growth risks have increased and it expects inflation to remain within its target range of 4% plus / minus 2%.