The Reserve Bank of India today announced its monetary policy, wherein it kept the repo rate unchanged at 4%, and retained its 'accommodative' policy stance.

India Inc. has reacted very positively to the developments. Here are a few of such reactions.

Zarin Daruwala, Cluster CEO, India and South Asia markets (Bangladesh, Nepal and Sri Lanka), Standard Chartered Bank

The Monetary Policy Committee (MPC) delivered a balanced policy statement supporting growth while keeping an eye on inflation. The continuation of the accommodative stance, the announcement of G-sec purchases through the G-Sec Acquisition Programme (GSAP) and introduction of term repos, should anchor interest rates. The six-month extension to the on-tap targeted long-term repo operations (TLTRO) scheme as well as to the scheme for priority sector lending (PSL) classification of bank loans to NBFCs for on-lending should help improve targeted credit delivery. The INR 50,000 crore support offered to SIDBI, NABARD and NHB will also augment credit growth. The hike in threshold for farmer working capital loans that would qualify as PSL lending, augurs well for the rural sector.

Sampath Reddy, Chief Investment Officer , Bajaj Allianz Life

RBI has delivered a dovish pause and reaffirms its accommodative stance and impetus to support the economic recovery. The central bank announced a secondary market G-Sec acquisition programme (GSAP 1.0), which indicates an intention to calendarize its G-sec purchases and will help to manage the yield curve and may help to reduce the term premium as well. GDP growth forecast for FY22 has been left unchanged at 10.5% (lower than IMF forecast of +12.5% growth), and inflation forecast remains broadly unchanged. The RBI also intends to lengthen the tenor of variable repo rate auctions, thereby helping to manage the system liquidity depending on evolving conditions and keeping it stable (although the governor said it should not be read as liquidity tightening). Overall, the policy has been dovish as supported by fall in bond yields, and this should also benefit the equity markets by keeping borrowing costs in check for some time.

Dhawal Dalal, CIO-Fixed Income, Edelweiss Mutual Fund

In today’s monetary policy the RBI Governor not only reiterated his commitment to maintain current accommodative policy stance until the economy is on firm footing but also pleasantly surprised bond market participants with proposed Government Securities Acquisition Program 1.0 (GSAP 1.0) which will purchase government securities worth Rs. 1 trillion in Q1FY22. Bond market participants have always longed for an RBI Open Market Operations (OMO) Purchase calendar. The RBI probably heard their prayers and decided to follow through GSAP 1.0. We believe that a proper execution of this program will achieve the following twin objectives:

1. It will provide certainty to the bond market participants with regard to RBI’s commitment of support to bond market in FY22.

2. . It will also help reduce term premiums on the long-end.

Vikash Agarwal, President, Indian Chamber of Commerce (ICC)

Today RBI kept interest rates unchanged for the 5th time in a row as the economy faced a renewed threat to growth because of resurgence of Corona cases. The Central Bank kept the benchmark Repo Rate unchanged at 4% and the Reverse Repo rate at 3.35% and maintained an accommodative policy stance to support growth. The Monetary Policy Committee (MPC) stand was helped by Inflation Rate at 5.2% in first half of FY20-21 to 4.4% in Q3 of the same.

Indian Chamber of Commerce (ICC) also lauded the RBI’s assurance to ensure ample liquidity in system so that productive sectors get adequate credit, and ensure orderly conduct of government borrowing & preserve financial stability. The commitment to an Open Market Operations (OMO) Calendar, with purchase of 1 lakh crore of G-Secs , in the first quarter of current fiscal, will help in the evolution of the yield curve. The enhancement of Ways & Means Advance limit to ₹47,010 crore, up 46% from current limit of ₹32,225 crore would help in part financing the expenditure needed to generate demand.

Indian Chamber of Commerce deeply appreciates this sensitive and accommodative stance of RBI which would benefit the economy and all the stakeholders, including Industry.

Esha Khanna - Assistant Professor, Sarla Anil Modi School of Economics, SVKM’s NMIMS

RBI once again acts as a safeguard, amidst rising infections, in response to evolving macroeconomic indicators. The prominent feature remains that G-SAP operations are likely to stabilize and strengthen the yield curve of bonds along with the extension of TLTRO scheme. Special refinance facilities for All India Financial Institutions and enhancement of the limit on maximum balance of payments make the policy more inclusive, and will surely ensure the flow of liquidity and credit to the ailing sectors. The policy decisions must be applauded for remaining accommodative and for providing much-needed impetus to the economy through both direct and indirect measures, as downside risk still prevails.

Mohit Ralhan, Managing Partner and Chief Investment Officer, TIW Private Equity

RBI has maintained the accommodative stance indicating that the primary focus area is growth and economic recovery. It is an extremely positive step especially confirming the continuation of accommodative instance till the time it is required to support the growth. The G-Sec acquisition program is also quite significant to ensure cooling off of bond yield and financial stability given the global uncertainty around the risks related to COVID-19. RBI has demonstrated sustained commitment to growth and maintaining adequate liquidity in the financial system, which augurs well for the coming year. Recently, the markets have been under pressure, primarily due to rising cases of COVID-19 and RBI’s policy announcements today can give it a fresh impetus.

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance Co. Ltd

Overall an extremely Dovish and Pragmatic Policy focused on Growth. MPC has stayed on course despite a tight ropewalk of balancing ‘the Incumbent Growth and inflation dynamics’, especially at a time when the spectre of surging Covid 19 cases and the resultant uncertainty had clouded the markets. MPC has reassuringly tried to assuage the markets by re-emphasizing its commitment to keeping policy accommodative with a shift to ‘state based guidance’ and maintaining ample liquidity. A shot in the arm was giving the antidote to the bond markets in the form of announcement of an explicit OMO - GSEC purchase calendar, which should put to rest the mounted apprehensions of demand supply mismatch in the bond markets. MPC has rightly continued to stay cautious and vigilant and not react to the incumbent global and domestic pressures beckoning for maneuvering of the monetary policy.

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