RBI keeps interest rate unchanged in its bi-Monthly Monetary policy December 2020: Here is how Industry leaders reacted

New Delhi: Reserve Bank of India on Friday stored the benchmark rate of interest unchanged at Four % however maintained an accommodative stance.

The benchmark repurchase (repo) fee has been left unchanged at Four %. Consequently, the reverse repo fee may even proceed to earn 3.35 per cent for banks for his or her deposits stored with Reserve Bank of India (RBI).

Dinesh Khara, Chairman, SBI

“The RBI policy of maintaining the status quo was expected but the continued forward guidance of an extended accommodative stance will continue to serve the markets well. The upward revision of the FY 21 GDP growth rate to -7.5 percent emphasizes that the worst is behind us though we must remain watchful. The central bank announcement of the extension of on-tap TLTRO to stressed sectors is a perfect example of coordinated monetary and fiscal policy coordination, a hallmark of the current pandemic. Allowing the RRBs to access the liquidity adjustment facility, will help RRBs to efficiently deploy and diversify their surplus funds and enlarge the reverse repo window. The move towards the strengthening of supervision of financial entities will right-size the three lines of defense in pursuit of an effective risk management framework. Measures such as digital payments supervision, deepening financial markets, and ensuring ease of doing business for export transactions are useful steps.”

Sangita Reddy, President, FICCI

“It is heartening to see RBI confirming that it will maintain an accommodative stance till the time necessary for stabilizing growth on a firm footing. While the inflation trajectory has moved up, at this point in time re-energizing growth should get all the attention. There has been a substantial upgrade to the overall growth forecast for the second half of the current fiscal. This is encouraging but given the stress the economy had faced on account of COVID-19, we anticipate that policy support, both from the RBI and the government, will be required well into the next year.” 

Abheek Barua, Chief Economist, HDFC Bank

The RBI stored its coverage fee unchanged at 4%, as anticipated, and continued to maintain its coverage stance accommodative. Some sections of the market had anticipated the central financial institution to behave on the rising surplus liquidity within the system in mild of the growing inflationary pressures. However, the absence of any main liquidity absorption measures within the midst of a chronic inflationary episode and certainly the upward revision of each the RBI’s progress and inflation forecasts is perhaps considerably puzzling. However, it may imply that the RBI is a) nonetheless cautious in regards to the sturdiness of progress given the myriad uncertainties associated to progress, b) it sees inflation as principally a provide side-problem amenable to produce slightly than financial intervention, c) it’s keen to tolerate larger inflation so long as progress impulses change into firmly entrenched and 4) it maybe expects some pure moderation in liquidity as the federal government normally goes into assortment mode within the final quarter of the fiscal. In reality, given its emphasis on progress revival and the suggestion that there’s nonetheless some more room left for financial assist, one other 25-50 foundation level reduce in 1H CY2021 can’t be dominated out.

Nilesh Shah, Group President & MD, Kotak Mahindra Asset Management Company

“Credit policy has come on expected lines with continuation of pro-growth measures. There are several steps taken to strengthen financial stability. RBI has taken right direction in Keeping inflation on the back foot and supporting growth.”

Amar Ambani, YES SECURITIES

“In line with the expectations, RBI decided to stand pat on the policy rate and updated growth and inflation outlook given that inflation remains stubbornly high, while growth is gaining traction. The central bank scaled down on its earlier pessimistic GDP projection for FY21 as the frequency indicators and GDP data convey meaningful rebound in economic activity in both rural and urban demand. Inflation will remain as a hindrance for next two quarters and will dissuade further policy rate cuts at least for FY21. MPC did not unleash new on the non-interest rate tools, as significant measures (OMOs, TLTROs) have already been announced during the last policy meeting. The fact that liquidity remains high, while growth is gaining traction, makes us believe that RBI will adopt a wait and watch approach for next few months.  Nevertheless, the MPC reiterated its accommodative stance given the transitional phase the economy is going through, in terms of recovery from the pandemic.”

Rajiv Sabharwal, MD and CEO, Tata Capital

RBI continues to pause charges for the third consecutive coverage. The inflation print appears larger than its consolation hall which for now’s an rising state of affairs. The full restoration of provide chain within the close to time period will carry readability on the inflation glidepath. The credit score off-take revival has thus far been gradual, however inexperienced spouts are seen in sure sectors which should be nurtured. RBI clearly acknowledges the necessity to additional incentivize demand for a broad based mostly exercise pickup. RBI maintains its resolve to strengthen progress within the economic system.

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Shanti Ekambaram, Group President – Consumer Banking, Kotak Mahindra Bank

While progress is headed in the correct route, it must maintain over the medium-term. In addition, restoration must be broad-based and would require sustained coverage assist. Thus, the MPC’s unanimous determination to maintain charges unchanged regardless of larger inflation, with a continued accommodative stance for so long as is important within the present monetary 12 months and the following, is a giant positive.