The Reserve Bank of India, in the first bi-monthly monetary policy of 2022-23, has tried to address the impact of the ongoing uncertainties in the global economy on domestic growth and inflation, said bankers.

“In line with the market expectations, the RBI maintained the status quo on repo and reverse repo rate in policy. Taking into consideration the uncertainty around the global economy and the nascent stage of economic recovery in the domestic economy, the RBI decided to ‘remain accommodative while focussing on withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth’,” said AK Goel, Chairman, Indian Banks’ Association, and Managing Director and CEO, Punjab National Bank.

“RBI has delivered a policy aiming to control the price level without disrupting the growth trajectory,” he further said.

Dinesh Khara, Chairman, State Bank of India, said the RBI policy announcement is a pragmatic assessment of the current uncertain economic environment.

‘Post-Covid world’

“The RBI has rightfully re-calibrated the growth and inflation numbers and announced a slew of measures to support the government borrowing program in a non-disruptive manner. Overall, the policy announcement now prepares us for a world after Covid,” he said.

Atanu Kumar Das, MD and CEO, Bank of India, said the policy continues to have a ‘feel good’ stance from the point of view of durable recovery process.

“The projected numbers perhaps warrant more frequent revisits in the face of dynamically evolving operative environment, within and outside India,” he noted.

According to Shanti Lal Jain, MD and CEO of Indian Bank, by maintaining its accommodative stance and unchanged policy rates, the RBI has once again indicated that economic growth is its primary objective.

“The RBI has brought in several measures to manage the liquidity in the system and keep reigning inflation under control while sustaining the economic growth,” he further said.

Zarin Daruwala, Cluster CEO, India and South Asia markets (Bangladesh, Nepal and Sri Lanka), Standard Chartered Bank, said: “The RBI’s decision to raise the operational rate by 40 basis points by introducing a standing deposit facility (SDF) window is in sync with rising inflation and higher global yields.”

With this move, the MPC has reaffirmed its commitment to containing inflation, while promising adequate liquidity to support India’s growth agenda, she further said, adding that the move also will bolster macroeconomic stability and fortify the rupee. 

Analysts expect the RBI to start raising rates and changing its stance from as early as the June policy.

“The change in tone in today’s meeting, and narrowing of LAF corridor will prepare the markets for repo rate hikes, which we expect to be 50 to 75 basis points in fiscal 2023, beginning with the June monetary policy review. The pace of tightening will be guided by the surprises emanating from inflation and external risks,” said Dharmakirti Joshi, Chief Economist, CRISIL.

Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank, noted that the RBI has shifted towards hawkishness, acknowledging the increasing upside risks to inflation. “The withdrawal of accommodation tilt is clear by the normalisation of the effective policy corridor to pre-Covid levels of 50bps. We expect the MPC to change the policy stance to neutral in the June policy. The repo rate hikes will follow from August. We see 50 basis points repo rate hike in 2022-23,” she said.

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