Mumbai, Feb 10 (PTI) Bankers on Thursday welcomed the Reserve Bank of India’s (RBI) decision to keep the repo rate unchanged and said the accommodative stance augurs well for the country’s economic recovery.
In the monetary policy announced on Thursday, the RBI held its key lending rates steady at record low levels for the 10th straight meeting to support a durable recovery of the economy from the COVID-19 pandemic.
The six-member monetary policy committee (MPC) decided by a majority of 5 to 1 to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.
“The RBI policy statement is an affirmation to keep the rate structure at reasonable levels to support an incipient growth recovery,” State Bank of India’s (SBI) Chairman Dinesh Khara said.
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 a reasonable balance, he said.
Indian Banks Association (IBA) Chairman and Punjab National Bank (PNB) Managing Director and CEO Atul Kumar Goel said that the RBI has once again focused on giving a push for growth in this policy.
“Overall aim of continuation of accommodative stance as long as necessary to revive and sustain growth on a durable basis was on the expected line as several segments of the economy are still in the nascent stage of recovery,” he said.
On the banking front, the RBI held that the banks should continue the process of capital augmentation and also focus on governance and risk management, Goel said.
HDFC Bank Chief Economist Abheek Barua said 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,” Barua said.
Kotak Mahindra Bank Ltd Group President (consumer banking) Shanti Ekambaram said the RBI has signalled that it will continue to support economic growth as long as required. The policy outlook is stable but the narrative is slightly different from what the markets had expected, she said.
“MPC’s key mandate is to keep inflation within its target band of 4 per cent 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,” Ekambaram said.
Standard Chartered Bank’s Cluster CEO, India and South Asia markets (Bangladesh, Nepal and Sri Lanka) Zarin Daruwala said the MPC decision to hold rates is a testament to RBI’s pro-growth stance.
“Coupled with last week’s expansionary Union Budget, RBI’s decision to remain accommodative for as long as needed augurs well for India’s economic recovery and also for its journey towards becoming a USD 5 trillion economy,” she said.
The decision to hold rates will cap borrowing costs and will also aid credit delivery, she added.
Federal Bank Group President & CFO Venkatraman Venkateswaran said RBI surprised the market by continuing its “accommodative stance” and not increasing the reverse repo rate, which was widely expected. The RBI continues to prioritise growth over inflation and at the same time acknowledges the risk to inflation, he said.
Bank of India’s MD&CEO A K Das said continued policy support commits to durable and broad-based recovery across real segments.
SBI’s Khara said 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 faster adoption of digital transactions, which could eventually usher in a rollout of the digital rupee, Khara said.
Indian Bank MD and CEO Shanti Lal Jain said by conducting VRRR and other measures RBI will look to control liquidity in the system. Increasing the cap for FPIs to invest in the domestic bond market will help the government borrowing plan. PTI HV MR
