Kolkata, Dec 8 (UNI) Indranil Pan, Chief Economist, YES BANK, commenting on the RBI Monetary policy, today said, " Monetary policy remains on expected lines, even with respect to the reverse repo rate. "

" RBI paints a relatively docile picture on inflation for now whilst it wants to ‘assiduously’ nurture growth to make it ‘self-sustaining’. Immediate risks to growth as seen from the Omicron is one specific factor that allows RBI to stay on a status-quo for now. RBI keeps the door ajar, but would probably be more patient on inflation being slightly on the higher side than growth on the faltering side, " he added.

" The turn in the investment cycle will be crucial, that unfortunately is yet to happen. Furthermore, RBI would want to factor in the fiscal policy of February within the scope of adjustments under the monetary policy. If fiscal policy is relatively tighter for next year, then monetary policy might have to continue to remain accommodative. "

" We believe that RBI will attempt to close the LAF (Liquidity adjustment facility) corridor in February if the understanding on the growth-inflation dynamics turns favourable towards growth. Any changes to the Repo rate are still way off and into FY23. Taking a call immediately may be difficult unless there is a clarity on the new variant and the hurt it can inflict on the economy in the near term."

George Alexander Muthoot, Managing Director at Muthoot Finance, said, " We welcome RBI's decision to continue with accommodative stance as long as necessary and maintain status quo on rates, the RBI also remains committed to broaden growth impulses and preserve financial stability. I concur with RBI’s stance that while the recovery impacted by the pandemic is gaining traction, Private consumption is still below pre-Covid levels, private investment is still lagging and hence the nascent growth still needs policy support. "

" The RBI also continues to rebalance liquidity conditions in a non-disruptive manner. While the challenges interms of managing growth-inflation dynamics, uncertainty with regards to Omicron continue, we are hopeful that the continued policy support will bode well for sectors like MSME, Agriculture and housing. We are also hopeful that pick up in Government spending and pent up demand will ensure that the market sentiment remains positive and demand revival continues to

pick up pace thereby supporting demand for gold loans. "

Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance, said, " The RBI on expected lines kept the key rates unchanged for the ninth consecutive time and retained accommodative stance as long as necessary. While rebalancing liquidity conditions in a non-disruptive manner, the Governor reiterated commitment to support the nascent economic recovery and preserve financial stability. "

" The Governor once again retained FY22 GDP growth forecast at 9.5% and stated that while the recovery is gaining traction, it is not strong enough and private investments are still lagging. Amidst the challenges with respect to inflationary pressure, global supply chain bottlenecks, high commodity prices, uncertainty caused due to Omicron, the RBI’s motto is to ensure a soft landing that is well timed, " he stated.

" While we need to be cognisant about sticky core inflation, continued benign interest rates will be positive to support broader economy particularly SMEs, small businesses and unorganised sector. As we look forward to 2022, the business activities have resumed pan-India, Government spending is picking up, we are hopeful that this will give fillip to urban demand conditions thereby supporting vehicle finance industry. ”

YS Chakravarti, MD & CEO, Shriram City, said, " RBI keeping interest rates unchanged is supportive of growth. While green shoots are beginning to show, private consumption continues to

be below the pre-COVID levels. MSMEs have started stabilizing, and we expect MSMEs to bounce back in 2022. Spending will pick up at the middle and lower-income groups as COVID impact fades, and fuel tax cuts will likely aid purchasing power. Two-wheeler demand in rural India has been lagging and should gain momentum in 2022. Omicron poses a risk, if widespread lockdowns return, the outlook will alter substantially. "

Amar Ambani, Senior President & Head of Institutional Equities, YES Securities, said, " Though a status quo on the repo rate was in line with the market expectations, no move on the reverse repo was not what the money markets were pricing in. Yields in the money markets have been firming up, given that variable reverse repo auctions are being conducted at rates proximal to 4%. "

" The status quo on the reverse repo is construed to be dovish. The central bank justified the status quo given the emerging uncertainty over the new COVID variant and lagging private investments. RBI is sticking with a tailored policy stance that balances growth and inflation. Meanwhile, RBI will continue to absorb excess liquidity in a non-disruptive manner, primarily through variable reverse repo auctions. "

"On the demand side, RBI reckons frequency indicators portends traction in consumption, though it needs to sustain and needs policy support. Govt spending will provide support to aggregate demand. On projections, FY22 GDP growth is retained at 9.5%, while Headline CPI inflation is seen peaking in Q4 FY22 and then softening thereafter. CPI average of 5.3% is seen for FY22, falling to 5% in Q1 and Q2 FY23, " he added.

" On the interest rate trajectory, we see that RBI has simply kicked the can down the road in terms of normalizing the LAF window. It seems that RBI is content with the fact that VRRR auctions have been efficacious in absorbing excess liquidity and do not want to tinker much with the policy rates now given the nascent economic recovery and still looming uncertainty of the pandemic. We think the normalization of the LAF window is now subject to the durability of the economic recovery and mitigation of the pandemic uncertainty. Meanwhile, normalization of the repo rate is completely ruled out till most of the H1 FY23.”

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