New Delhi, Oct 6 (FN Agency) Terming the RBI’s monetary policy as prudent, banking experts and sector-watchers have said that the status quo on policy repo rate is largely on expected lines with many of them seeing the pause on repo rate to continue for long. The Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) on Friday decided to keep the policy repo rate unchanged at 6.50%. Consequently, the standing deposit facility (SDF) rate remains at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%. “The ability of RBI to remain steadfast and focused on pitching key growth deliverables, bodes well even as global uncertainties pick pace outside,” said Dinesh Khara, Chairman, State Bank of India (SBI).
George Alexander Muthoot, Managing Director, Muthoot Finance said that given the current global slowdown, resilient Indian economy and easing domestic inflation, the RBI on expected lines maintained status quo on policy repo rate at 6.50% and reinforced its focus on aligning the overall inflation within the 4% target. Commenting on the fourth monetary policy review of FY24, Sunil Kumar Sinha (Senior Director & Principal Economist) and Paras Jasrai, Senior Analyst at India Ratings and Research said that frequent disruption to the effort of aligning inflation and inflationary expectation to the inflation target has made RBI more cautious in its approach towards the conduct of monetarypolicy. “Therefore so long as there is no clear visibility towards CPI inflation coming close to 4.0% on a durable basis, repo rate may not come down from the current level. As RBI is projecting even 1QFY25 CPI inflation at 5.2% and real GDP growth at 6.6% it looks like we may have to brace for a long pause on repo rate,” they said. RBI primarily factors in consumer price index (CPI)-based inflation to decide its key policy.
The central bank is tasked to keep inflation in the range of 2-6% and maintain price stability in the country. Venkatraman Venkateswaran, Group President & Chief Financial Officer at Federal Bank said that MPC’s decision on policy repo rate is in line with expectation. “Considering that the transmission of the rate hikes hasn’t been fully passed on, it was a prudent decision to adopt a wait-and-watch approach. Inflation management remains a focal point for the central bank, with a clear indication that the MPC will intervene if necessary to prevent any spillover effect from food or oil price inflation,” he said. Nish Bhatt, Founder & CEO, Millwood Kane International said, “The RBI has kept interest rates on hold for the fourth time in a row, which is a prudent move given inflationary trends largely driven by food prices. The economic activities remain resilient so far, however, headwinds from weak global demand, volatility in the global financial markets, and uneven monsoon, pose risks to the future outlook.” Rajiv Sabharwal, MD & CEO, Tata Capital said that RBI’s decision to maintain status quo on repo rate shows its steadfast commitment to ensure economic stability and provide a reliable environment for growth despite uncertainties. “The holistic perspective will ensure a sustainable balance between growth and inflation, which is crucial for the long-term health of the economy,” he said.
The RBI has also maintained its earlier projection of real GDP growth for 2023-24 at 6.5%. Sanjay Palve, Senior Managing Director, Essar Capital said that RBI’s decision to keep the repo rate unchanged at 6.50% and maintain a ‘withdrawal of accommodation’ stance, today demonstrates a responsible approach to monetary policy and aligns with expectations in this dynamic economic scenario. “This constancy offers businesses a clear and stable monetary environment during a period of fiscal challenges and uncertainties. It’s essential for boosting investor confidence and facilitating long-term strategic planning. This choice conveys a strong message of resilience and stability as we navigate the complex economic environment, supporting India’s continuous efforts toward sustainable growth,” said Palve.