New Delhi, Aug 8 (UNI) RBI’s decision to hold the key rates unchanged at 6.5% for the ninth consecutive time was on expected lines amid persistent inflationary pressures, feel the experts in the financial sector and the banking community.

“Seems like we must remain patient regarding any potential changes in stance or rate cuts,” Shanti Ekambaram, Deputy MD, Kotak Mahindra Bank said adding In light of global financial market volatility, divergent stances by central banks worldwide, resilient domestic growth, and higher food inflation, the RBI’s decision to keep rates unchanged is prudent. The focus on maintaining price stability and targeting sustainable inflation of 4% is clear.

As widely expected by markets and policy-watchers, the Reserve Bank of India (RBI)'s Monetary Policy Committee (MPC) today morning decided to keep the policy repo rate unchanged at 6.50% for the ninth consecutive time.

"The Monetary Policy Committee (MPC) met on August 6, 7 and 8. After a detailed assessment of the evolving macroeconomic conditions and the overall outlook, it was decided by a majority of 4:2 members to keep the policy repo rate unchanged at 6.5%. Consequently, the standing deposit facility (SDF) rate remains at 6.25%, and the marginal standing facility (MSF) rate and the bank rate are at 6.75%," RBI Governor Shaktikanta Das said.

Vinod Francis, Chief Financial Officer, South Indian Bank, said considering the current inflation and CPI, the MPC's decision to maintain the status quo was anticipated. This aligns with the RBI's goal of keeping the medium-term target of CPI inflation at 4% while supporting growth.

The economic climate remains unpredictable due to geopolitical uncertainties. However, the sustained momentum in manufacturing and services, along with the likelihood of an above-normal southwest monsoon and healthy kharif sowing, are positive indicators for the economy, Francis said.

Echoing similar views, Dr. Poonam Tandon, Chief Investment Officer at IndiaFirst Life Insurance, said the repo rate has been kept unchanged and has kept status quo on the stance of the policy. The RBI is confident on growth and inflation expectations have been kept unchanged.

The RBI has rightly emphasised that the focus will be on CPI inflation and not on the core inflation (which is softening). The Governor has been confident on the strength of India’s macroeconomic fundamentals, which remain robust. The liquidity has increased in the system and the bond market has already discounted a 25bps rate. We do not expect any rate cuts in the near future. Overall, a very balanced policy with status quo continues, Tandon added.

Madan Sabnavis, Chief Economist, Bank of Baroda said the RBI has quite unambiguously stated that the focus would be on headline inflation and that one cannot ignore food inflation, especially if it is persistent. This indicates that while inflation will come down in Q2, it will rise in Q3, and one cannot take a rate cut for granted in future. Any decision will be data driven and hence a calibrated call will be taken.

The picture may not be very clear in October and hence any change in policy and stance could be more likely not before December. RBI is sanguine on growth and hence there will be no conflict with the current stance taken on policy variable.

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