Money & Banking

‘A balanced approach amid surge in Covid cases’

Our Bureau. Mumbai | Updated on April 07, 2021

Bankers and experts said the continuation of the accommodative stance and the status quo on rates in the first bi-monthly Monetary Policy of 2021-22 is on expected lines and provides reassurance amid the surge in Covid-19 cases.

Welcoming the policy announcements, Raj Kiran Rai G, Chairman, Indian Banks’ Association, and Managing Director and CEO, Union Bank of India, said: “Only deviation in the policy statement is that accommodative stance is not linked to specific time frame, but indicated its continuance to “sustain growth on a durable basis”. Considering the uncertainty around the second wave of the Covid pandemic, providing a definite time frame for the stance would not be appropriate.”

State Bank of India Chairman, Dinesh Kumar Khara said the RBI policy announcement is an acknowledgement and continuation of doing whatever it takes to maintain an orderly, seamless, and non-disruptive liquidity management policy to support debt management.

‘A bold step’

“Towards this end, an extension of enhanced HTM limit, relaxation of funds availability under MSF, an extension of on-tap TLTRO to NBFCs, deduction of credit disbursed to ‘New MSME borrowers’ from their NDTL for calculation of CRR, will calibrate credit flow and liquidity management. Allowing retail participation in the G-Sec market is a bold step towards the financialisation of a vast pool of domestic savings and could be a game-changer,” he noted.

‘Overall a good policy’

SS Mallikarjuna Rao, Managing Director and CEO, Punjab National Bank, said it is overall a good policy to support and nurture the economy amid the recent surge in second wave of infections.

“While liquidity has been ensured via TLTRO in case the demand picks up, the opportunity of onlending through NBFCs, enhancement of loan limit against warehouse receipts and liquidity facility for All Indian financial Institutions are all good moves to ensure continued availability of credit, which aid faster economic recovery,” he said.

AK Das, Managing Director and CEO, Bank of India, said the policy announcement represents a balanced approach to make economic revival deep rooted, ensure orderly development of the financial market, and keep price movement at manageable levels.

Abheek Barua, Chief Economist, HDFC Bank, said: “The focus of the policy was clearly on yield management and the announcement of the G-sec acquisition program (GSAP 1.0) is likely to stabilise and support long-term yields. Although the extension of tenures for the VRRR (variable rate reverse repo auctions) might lead to some hardening at the short-end of the curve.”

In a note, HSBC Global Research said the RBI has, in a novel step, provided some upfront assurance on the quantum of bond purchases in a bid to provide more certainty to bond markets.

“We believe inflation risks cannot be ignored, and the RBI will embark on a gradual exit once the current wave subsides and the vaccination drive reaches critical mass,” it further said.

Published on April 07, 2021

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