Team NewsBarons connects with leading industry voices to share their outlook on the Monetary Policy.
The focus of the policy was clearly on yield management: Abheek Barua
The RBI policy was more dovish than expected with the central bank recognising the risks associated with the rising infection cases in the county and continuing its support for growth through a number of measures including its commitment to keep liquidity in surplus and an extension of measures like the on-tap TLTRO. Fears of any pre-mature tightening either through rates or liquidity management by some sections of the market have been put to rest by RBI’s dovish tone today. The governor was for instance categorical that the changes in liquidity measures announced today does not constitute tightening.
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. The upward revision of the inflation forecast by the RBI is justifiable given rising commodity prices, although we see further upside risks to the current forecast range. That said, inflation is unlikely to be an area of concern for the RBI for the coming months and growth is likely to remain the policy priority.
[Abheek Barua is the Chief Economist at HDFC Bank.]
A good policy to support and nurture the economy: S. S. Mallikariuna Rao
The RBI policy is on expected lines and is overall a good policy to support and nurture the economy amid 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, liquidity facility for All Indian financial Institutions are all good moves to ensure continued availability of credit which aid faster economic recovery.
[S. S. Mallikariuna Rao is MD & CEO of Punjab National Bank.]
Country’s economic recovery is still fragile: Sanjay Palve, Senior Managing Director, Essar Capital
As we witness the second wave of Covid-19 and its implications on the economic growth and inflation, the decision to hold the accommodative stance and keep repo rate at 4% was anticipated. The country’s economic recovery is still fragile and as the external demand continues to be uncertain, RBI’s continuous support, proactive and balanced approach is what is needed to ensure liquidity. A strong vaccination and distribution programme will gradually churn the wheels of business growth and economic revival.
[Sanjay Palve is the Senior Managing Director of Essar Capital]
We support an open and interoperable digital payments ecosystem: Satish Gupta
The decision by the Reserve Bank of India to increase the limit on maximum end-of-day balance to INR 2 lakh for Payments Banks account holders is a welcome step and will enable us to cater to the growing needs of our customers. Similarly, the increase in the current limit on the outstanding balance in full KYC PPIs from INR 1 lakh to INR 2 lakh will incentivize migration to full KYC PPIs which will further bring financial inclusion across the country. We support an open and interoperable digital payments ecosystem and are looking forward to the detailed guidelines on this subject.
[Satish Gupta is the MD & CEO of Paytm Payments Bank Limited.]
We expect increased sales in the coming quarter: Prasoon Chauhan
Although the repo rate has remained unchanged, we believe real estate would benefit from the Apex Bank’s announcement of extending long-term repo operation (TLTRO) for six months to September 2021. We expect that as a result of this decision, the liquidity situation will improve and that NBFCs will provide financial support to the real estate sector. Due to a variety of factors, including low home loan interest rates, demand for real estate assets is already high, and we expect increased sales in the coming quarter.
[Prasoon Chauhan is the Founder & CEO of BlackOpal Group.]