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RBI monetary policy: Repo rate unchanged, here's what experts say

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Aditya Narain of Edelweiss Securities, Amandeep Chopra of UTI MF, Abheek Barua of HDFC Bank, Anand Bagri of RBL Bank, Rajiv Anand of Axis, Taimur Baig of DBS Group Research and CS Setty of State Bank of India (SBI) shared their views on RBI monetary policy.

The Reserve Bank of India's (RBI) Monetary Policy Review Committee on Wednesday kept repo rates unchanged, while maintaining its ‘accommodative’ stance.
An accommodative stance means that the RBI will cut rates to inject money into the financial system whenever needed. The repo rate stands unchanged at 4 percent, the reverse repo rate at 3.35 percent, the marginal standing facility and the bank rate have been maintained at 4.25 percent.
Aditya Narain of Edelweiss Securities, Amandeep Chopra of UTI MF, Abheek Barua of HDFC Bank, Anand Bagri of RBL Bank, Rajiv Anand of Axis, Taimur Baig of DBS Group Research and CS Setty of State Bank of India (SBI) shared their views on the same.
According to Setty, the liquidity management by RBI is on the expected lines.
“There are no surprises but it gives great confidence to us that the momentum which we have seen in the last two months particularly in Q2 will continue to be there,” he said.
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Baig added that the central bank need not worry too much about inflation.
“If you think about the years 2020, 2021 and 2022, every successive year would be lower inflation. We are going from 6 to 5ish to 4ish into 2022, 2023,” he said.
It is a very dovish policy and the focus is around growth and growth impulses, said Anand.
“The intent should be to ensure that we get durable growth and on the back of that we start to see credit growth going forward. That is perhaps the intent of the RBI as well as we get into FY23,” he said.
“We are going to continue to be in an environment where liquidity will be somewhere around Rs 6-8 lakh crore over the next 18-24 months. Therefore the challenge in front of RBI is to ensure that the short-end rates don’t move towards the reverse repo rates but rather stay close to the repo rate and at some point of time in FY23 we start to move the repo rate up albeit slowly,” he added.
"The fact that policy continues to prioritize growth, downplays inflation and there is no talk about the path to either tightening or rates increasing is fundamentally very comfortable for the markets," said Narain.
In terms of the pattern, RBI is clearly following the set path of reducing liquidity in system, said Chopra.
Barua said that this is a formal acknowledgement that the real monetary policy tool has nothing to do with what the MPC does.
“It is what is happening with liquidity management,” he said.
Liquidity management is going on an expected lines however there has been a little bit of spike in the liquidity in the last fortnight, said Soumya Kanti Ghosh, Group CEA at SBI.
For more, watch the accompanying video.
Click here for more updates on RBI monetary policy
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