homeeconomy News

RBI Policy Highlights: Key rates on hold; Shaktikanta Das promises continued support for economy, says core inflation a concern

RBI Policy Highlights: Key rates on hold; Shaktikanta Das promises continued support for economy, says core inflation a concern

RBI Policy Highlights: Key rates on hold; Shaktikanta Das promises continued support for economy, says core inflation a concern
Read Time

RBI Monetary Policy Highlights | Governor Shaktikanta Das announced the Monetary Policy Committee's decision to hold the key interest rates at existing levels.  Currently, the repo rate stands unchanged at four percent, and the reverse repo rate at 3.35 percent. The MPC voted 5:1 to continue with its 'accommodative' stance. The RBI revised its consumer inflation forecasts. It now expects retail inflation at 5.1 percent in Q3, and 5.7 percent in Q4, but has maintained its FY22 projection at 5.3 percent. The RBI retained its real GDP growth forecast at 9.5 percent for FY22.

Live Updates

Thank you, readers! That's all from CNBC-TV18.com's live coverage on the RBI’s fifth bi-monthly review of 2021-22. Stay tuned for other updates on our website: CNBCTV18.com.

You can follow us on Twitter: @CNBCTV18Live @CNBCTV18News

And on FacebookLinkedInInstagram and Telegram

Download our mobile app for Android and iOS platforms

Dec 8, 2021 3:33 PM

RBI policy more dovish than expected, no surprises: HDFC Securities' Deepak Jasani

Deepak Jasani, Head of Retail Research at HDFC Securities, said there were no surprises in the December 8 policy, which turned out to be more dovish than expected. "The MPC’s focus is clearly on supporting growth through sufficient liquidity and low interest rates despite the Street's fears over inflation, global changes in interest rate policy and high commodity prices," he said. 

"The RBI of course can fine tune the surplus liquidity to manage rates depending on the evolving situation. If the Omicron variant turns out to be benign, the reverse repo rate hike may be hiked in February," he added.

Dec 8, 2021 2:56 PM

RBI to release minutes of fifth bi-monthly review of 2021-2022 on December 22

MPC Members voted 5:1 to continue with the 'accommodative' stance of policy. Shashanka Bhide, Ashima Goyal, Mridul K Saggar, Michael Debabrata Patra and Shaktikanta Das voted to continue with the 'accommodative' stance. Jayanth R Varma expressed reservations on this part of the resolution.

The RBI will release minutes of the December 6-8 policy review on December 22. The next review is scheduled on February 7-9, 2022.

Dec 8, 2021 2:50 PM

Repo rate normalisation completely ruled out till most of H1 FY23: YES Securities' Amar Ambani

Amar Ambani, Senior President and Head of Institutional Equities at YES Securities, believes normalisation of the repo rate is completely ruled out till most of the H1 FY23. "The RBI is sticking with a tailored policy stance that balances growth and inflation. Meanwhile, it will continue to absorb excess liquidity in a non-disruptive manner, primarily through variable reverse repo auctions. On the demand side, the RBI reckons frequency indicators portend traction in consumption, though it needs to sustain and needs policy support. Government spending will provide support to aggregate demand," he said.  

"On the interest rate trajectory, we see that RBI has simply kicked the can down the road in terms of normalising the LAF window. It seems that the RBI is content with the fact that VRRR auctions have been efficacious in absorbing excess liquidity, and does not want to tinker much with the policy rates now given the nascent economic recovery, and still looming uncertainty of the pandemic. We think the normalisation of the LAF window is now subject to the durability of the economic recovery and mitigation of the pandemic uncertainty," he added.

Dec 8, 2021 2:34 PM

Money markets were pricing in move on reverse repo rate: YES Securities' Amar Ambani

Amar Ambani, Senior President and Head of Institutional Equities at YES Securities, said that though the RBI's status quo on the repo rate was in line with market expectations, the money markets had pricing in a move on the reverse repo rate. "Yields in the money markets have been firming up, given that variable reverse repo auctions are being conducted at rates proximal to four percent. The status quo on the reverse repo rate is construed to be dovish. The central bank justified the status quo given the emerging uncertainty over the new COVID variant and lagging private investments," he said.

Dec 8, 2021 2:33 PM

A gamechanger of sorts for the common man: MobiKwik's Bipin Preet Singh on UPI payments through feature phones

Bipin Preet Singh, Managing Director, Co-Founder, and CEO of MobiKwik, said the RBI's announcement on acceptance of UPI payments through feature phones is a welcome move. "It widens the horizon of financial inclusion in India and enables a digital footprint for the masses, a prerequisite for evaluating the creditworthiness of an individual. It is a gamechanger of sorts for the common man in India who can now be eligible for other financial services such as 'buy now-pay later', digital insurance and small ticket loans," he said. 

Earlier on Wednesday, RBI Governor Shaktikanta Das said the central bank will launch UPI-based payment products for feature phone users. (Read more on RBI's announcement on UPI-based products for feature phone users)

Dec 8, 2021 2:27 PM

RBI move on expected lines, benign interest rates to support SMEs, unorganised sector in particular: Shriram Transport Finance's Umesh Revankar

Umesh Revankar, Vice Chairman and MD at Shriram Transport Finance, said the RBI's move on interest rates and the policy stance was along expected lines. "Amidst the challenges with respect to inflationary pressure, global supply chain bottlenecks, high commodity prices, and uncertainty caused by the Omicron, the RBI’s motto is to ensure a soft landing that is well timed. While we need to be cognizant about is sticky core inflation; continued benign interest rates will be positive to support broader economy particularly SMEs, small businesses and the unorganised sector. As we look forward to 2022, the business activities have resumed pan-India and government spending is picking up. We are hopeful that this will give a fillip to urban demand conditions, thereby support the vehicle finance industry,” he said. 

Dec 8, 2021 2:19 PM

Hope continued policy support bodes well for sectors like MSME, agriculture, housing: Muthoot Finance's George Alexander Muthoot

George Alexander Muthoot, Managing Director at Muthoot Finance, welcomed the RBI's decision to continue with its 'accommodative' stance for as long as necessary, and to continue with a status quo on rates. "I concur with RBI’s stance that while the recovery impacted by the pandemic is gaining traction, private consumption is still below pre-COVID levels, and private investment still lagging, and hence, the nascent growth still needs policy support," he said. 

 "While the challenges in terms of managing growth-inflation dynamics and uncertainty with regards to the Omicron continue, we are hopeful that the continued policy support will bode well for sectors like MSME, agriculture and housing. We are also hopeful that a pickup in government spending and pent-up demand will ensure that the market sentiment remains positive, and demand revival continues to pick up pace, thereby supporting demand for gold loans,” he added.

Dec 8, 2021 2:13 PM

RBI move on rates points to road to recovery: Poddar Housing MD

Rohit Poddar, Managing Director at Poddar Housing and Development, said the RBI's decision on key rates points to the road to economic recovery. "An overall economic activity progressing towards retained inflation is good news and showcases that the overall economic activity in the country has evolved. While the rise in commodity prices has put upward pressure on input material costs, the economy's low interest rate regime has been a major contributor to the housing sector's recovery," he said.

Dec 8, 2021 2:01 PM

Inflation unlikely to become key driver for monetary policy decision in short term: RBL Bank's Rajni Thakur

Rajni Thakur, Chief Economist at RBL Bank, said the MPC's announcements were an emphatic validation of the RBI’s continued focus on domestic growth inflation dynamics. "Inflationary concerns were downplayed with inflation forecasts well below expectations... Even if actual inflation levels hit higher than projected path, it’s unlikely to become the key driver for monetary policy decision in short term while sustained push towards closing output gap will likely bring about material growth gains," she said.

"Nevertheless, changing growth dynamics domestically and the global financial backdrop called for some communication on the normalisation path, which was left out in the MPC statement. Thus, while out of sync with some global trends, focus on domestic macro dynamics and liquidity management bodes well for the recovery path ahead. While changing financial conditions might put some normalisation pressure in 2022, for now the central bank has a clear bias towards buying time before any rate action, pushing back our expectations for a February reverse repo hike," she added.

Dec 8, 2021 1:48 PM

RBI used policy well as a lever to prepare market for approach towards normalisation: Emkay's Madhavi Arora

Madhavi Arora, Lead Economist, Emkay Global Financial Services, said the RBI's status quo on rates as well as stance was along expected lines. "However, Prof Jayanth Varma’s possible dissent on continuation of accommodative stance for foreseeable future continues to keep MPC in split state. There were no material changes in growth and inflation outlook in near term. The focus was on communication on liquidity management key amid evolving market risks. As expected, the RBI did not opt for a reverse repo hike, and the policy is well used as a lever to prepare the market for a gradualist approach towards normalisation through both communication and action," she said. 

Dec 8, 2021 1:27 PM

MPC ensures not to 'rock the boat': Samco Group' Yesha Shah

Yesha Shah, Head of Equity Research at Samco Group, said the RBI's status quo on key rates and the policy stance was in line with expectations given the gloominess around Omicron, and the uneven recovery between unorganised and organised India. "As growth remains the linchpin of policy and inflation concerns seem to be comparatively mellow, the policy seems reassuring to an extent. However, the decision may be influenced by the Fed's stance as the MPC ensures not to 'rock the boat'," Shah said. 

"There are some central banks across the globe that have already stepped up and pulled the plug on liquidity. The RBI seems to be a backbencher on this front offering no clarity on when the rate hikes might start. Other policy announcements in terms of liquidity management and progressively increasing VRRR are all moves in the right direction but at the end of the day, only time will tell if it is enough," she added. (Catch LIVE stock market updates)

Dec 8, 2021 1:16 PM

Current credit growth quite low for economy: Shaktikanta Das

RBI Governor Shaktikanta Das said that the current credit growth of around seven percent is quite low for the economy. Credit flow to the commercial sector has seen some increase, but the private capex and credit demand need to pick up, he said. 

Dec 8, 2021 12:58 PM

Shaktikanta Das says RBI has recognised core inflation as a policy concern

RBI Governor Shaktikanta Das said the central bank has recognised that core inflation is a policy concern. International markets are turning increasingly volatile, he said. 

Here are some highlights of what the RBI chief said at the press conference: 
--Activity in various segments of economy has crossed pre-pandemic levels               

--Private investment, private consumption, few others still lagging behind  

--Economy is facing several headwinds from mostly international factors              

--We are seeing a surge in infections in many advanced economies         

--MPC judged better to be cautious at this current stage              

--Effort is to control the  liquidity in market         

--Undertaking long-term VRRRS as well 

--Unfair to compare Indian inflation dynamics with other countries

--We have recognised that core inflation a policy concern

--International markets are turning increasingly volatile 

--US Fed is probably looking at a faster taper; we are extremely watchful

--Current credit growth of over 7% quite low for Indian economy 

--Credit flow to commercial sector has seen some increase

--Private capex is yet to pick up, credit demand needs to pick up

Dec 8, 2021 12:43 PM

RBI status quo augurs well for interest-sensitive sectors: Brickwork Ratings' Rajee R

Rajee R, Chief Ratings Officer at Brickwork Ratings, said the RBI's decision to maintain key rates as well as its 'accommodative' stance is a welcome move to support growth, and augurs well for interest-sensitive sectors. "In view of the evolving economic scenario and uncertainties associated with the scale of the recovery, especially in view of the possible economic impact of the Omicron variant and concerns on the supply side challenges to meet the catchup demand, the RBI has reiterated its policy support to broaden growth impulses and encourage credit flow to productive sectors. Continuing with its calibrated liquidity management policy to maintain financial stability, the RBI emphasised that VRRR would be the main tool for liquidity adjustment indicating gradual policy normalisation on the liquidity front," Rajee said.

"The decision to allow banks to infuse capital in their overseas branches and subsidiaries, and repatriate profits without seeking prior approval of the RBI will provide much needed operational and financial flexibility to banks."

Dec 8, 2021 12:35 PM

Top Budget Opinions

    Most Read

    Market Movers

    View All
    Top GainersTop Losers