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Business EconomyPosted at: Aug 6 2020 5:49PM


MPC’s decision to keep rates on hold in line with expectation : Deodhar

Kolkata, Aug 06 (UNI) Anagha Deodhar, Economist, ICICI Securities, today said Reserve Bank of India (RBI)'s Monetary Policy Committee has kept the rates on hold in line with the expectations.
" Although the committee delivered large rate cuts since the onset of COVID-19, credit growth has been falling consistently, " she stated.
" This shows that the ability of monetary policy in stimulating growth is constrained in the current situation. The MPC’s unanimous decision to pause is an acknowledgment of the same. "

" However, the RBI took a series of measures outside the purview of MPC to provide support to stressed sectors. Measures such as loan restructuring, increased in LTV for gold loans, additional liquidity facilities for NHB and NABARD are expected to have favourable impact. "

R K Gurumurthy, Head – Treasury, Lakshmi Vilas Bank, said, " RBI's rate setting committee, the MPC, left rates unchanged and even the stance of easy monetary conditions remains unchanged. While this was expected, market may feel initially disappointed as the policy leaves the steepness of the rate curve unaddressed, coming as it does at a time when growth is totally absent.

" RBI's caution on rates is driven by the fact that retail inflation is rearing its ugly head with food inflation remaining sticky and higher. RBI therefore expects elevated inflation readings for a few more months, although core inflation is soft. The positive thing is that RBI would continue to be watchful and has not yet cried halt to the easing cycle.

" While there was nothing on key policy rates to write home about, a few developmental measures with regulatory tweaks will go a long way in providing stability to key sectors of the economy. Will have to wait and see detailed circular guidelines for the finer aspects of these measures as one of the measures that relates to capital charge on debt schemes of mutual funds could be a game changer. "

Umesh Revankar, MD and CEO, Shriram Transport Finance, said, "RBI maintained status quo on policy rates but said that the accommodative stance will continue as long as necessary to revive growth and mitigate the impact of the pandemic. In this direction, the central bank has decided not to extend the moratorium and has instead allowed lenders to restructure some loans which is a positive change as account classification will remain standard and this will also ease provision requirements ahead.
" This is a welcome step and coupled with earlier measures taken by the regulator to ensure adequate liquidity and bring down borrowing costs, it will surely enhance the financial stability of the system.”
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