Friday, Feb 23 2024 | Time 22:46 Hrs(IST)
Business Economy

Bankers, industry say RBI monetary policy on expected lines

New Delhi, Dec 8 (UNI) Hailing the Reserve Bank of India (RBI)'s decision to continue the pause on key lending rate, bankers and industry captains have said that stable monetary policy would support growth.
They maintained that the status quo on policy repo rate for the fifth time in a row is on expected lines.
Madan Sabnavis, Chief Economist, Bank of Baroda said that the policy does not have any surprise on the repo rate or stance.
"However, there is a major revision in GDP forecasts for the year to 7% which is predicated by a good third and fourth quarter which go with revival in consumption demand. This is significant because we were getting contrary signals from the market on rural demand," he said.
As widely expected by markets and policy-watchers, the RBI's Monetary Policy Committee (MPC) on Friday decided to keep the policy repo rate unchanged at 6.50%.
With domestic economic activities holding up as reflected in the GDP growth in the second quarter of this year, the central bank revised upward its FY24 GDP growth estimate to 7% from 6.5% earlier.
"The Reserve Bank of India's decision to keep the repo rate unchanged at 6.50% and maintain a ‘withdrawal of accommodation' stance, today demonstrates a responsible approach to monetary policy and aligns with our expectations in this dynamic economic scenario. This constancy offers businesses a clear and stable monetary environment during a period of fiscal challenges and uncertainties," said Sanjay Palve, Senior Managing Director, Essar Capital.
Rajiv Sabharwal, MD & CEO, Tata Capital said that continued focus on aligning inflation with the 4% target showcases the importance of maintaining price stability for inclusive growth.
"The India story continues to reach new heights, with the GDP growth projection raised to 7% for FY’24, indicating the RBI's confidence in economic resilience and signaling optimism across all sectors," he said.
Industry body Assocham said that RBI's continuing focus on 'disinflationary' monetary policy retaining key repo rate unchanged at 6.50 per cent is well aligned with the intention of the MPC for an ecosystem, favourable to a sustainable growth which promises to be robust braving global headwinds.
Prashant Pimple, Chief Investment Officer, Baroda BNP Paribas Mutual Fund expects the MPC to be tilting towards growth oriented from inflation with overall yield curve to soften by 50-75 bps in next 6-9 months owing to improved liquidity given soft inflation and growth headwinds.
Radhika Rao, Executive Director and Senior Economist, DBS Group Research said that even as the policy rate is steady she expects the short-term money market rate to stay elevated at the upper end of the corridor, viewed as stealth tightening.
"Liquidity is also likely to be tight over the next two weeks, with the balance thereafter to be dictated by higher currency in circulation ahead of the elections, government spending, resumption in inflows and RBI’s operations," she said.
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