Money & Banking

Maintaining status quo on rates will help further revive economy: Bankers

Our Bureau Mumbai | Updated on October 09, 2021

Say there is more focus on growth momentum in this policy

The Reserve Bank of India’s decision to maintain the status quo on rates would help in a full-fledged economic revival but bankers and market participants are awaiting clear signals on liquidity normalisation.

Signs of recovery

Raj Kiran Rai G, Chairman, Indian Banks’ Association, and Managing Director and CEO, Union Bank, said, “Today’s policy is announced against the back drop of nascent signals of recovery of the domestic economy and mixed cues from the global economy.”

Also see: In a bid to lower power costs, Govt to implement Phase 1 of market-based economic despatch from April next

Since the price situation is under control for the time being, the central bank has given more focus on growth momentum in this policy also, he added.

Tapering excess liquidity

While the RBI has given a roadmap for tapering of excess liquidity from the system in a calibrated manner without disrupting government borrowing programme and liquidity needs of the economy, Rai said clear signals to the market will help the participants manage their liquidity needs well.

Accommodative stance

“The continuation  of accommodative stance reaffirms the RBI’s commitment to support economic revival,” said AK Das, Managing Director and CEO, Bank of India.

Zarin Daruwala, Cluster CEO – India and South Asia Markets, Standard Chartered Bank, also said the MPC has reinforced its commitment to growth by continuing with its accommodative stance and holding the repo rate.

“The RBI’s latest economic forecast also points to a robust recovery amidst lower inflation,” she added.

Delayed normalisation

An SBI Ecowrap report said it expects that the normalisation of reverse repo and repo corridor may be possibly delayed beyond December.

Also see: Watch | RBI maintains status quo on rates

HSBC Global Research in a note said, “While the RBI kept rates and stance unchanged as expected, we think it took important steps to prepare the market for future policy normalisation.”

It expects the policy corridor to be narrowed over December and February, but repo rate hikes will only follow in the second half of 2022.

Published on October 08, 2021

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