The RBI’s decision to maintain status quo on key rates did not come as a surprise to many in the banking circles as it was already factored in by the markets. Bankers welcomed its projection on softening of inflation, as it could lead to a further pause or even a change in the policy stance.

State Bank of India

“The RBI decision to keep rates on hold was more in consonance with market expectations, but the policy guidance was a pleasant and pragmatic surprise. The significant downward revision in inflation projections and assurance of continued durable liquidity was most reassuring to market participants in terms of a stable and predictable interest rate structure,” said Rajnish Kumar, Chairman, State Bank of India.

Bank of India

Noting that the RBI has remained committed to maintain inflation at targeted levels, Dinabandhu Mohapatra, Managing Director and CEO, Bank of India, said it has also taken care of the real economy at the same time. He also said that the RBI’s decision to link all new floating rate personal, retail and MSMEs loans to one of the four suggested external benchmarks, will introduce greater standardisation of these loan categories.

Experts also believe that the MPC could change its stance at the next meeting in February if inflation continues to be in a downward trajectory.

Noting that one of the members of the MPC suggested a change in policy stance to ‘neutral’, Abheek Barua, HDFC Bank Chief Economist, said: “Given the downside risks to growth, we believe that some more members could tilt towards a change in stance by the next meeting in February. During the press conference, RBI Governor Urjit Patel also hinted that the conditions are gradually changing and they await for more robust inflation signals to consider any change in the policy.”

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