The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) kept the repo rate unchanged in the first bi-monthly monetary policy meet for the financial year 2021-22. With no change this time as well, the repo rate currently stands at 4 percent. The reverse repo rate has been maintained at 3.35 percent.
In an interview to CNBC-TV18, Ananth Narayan, professor at SP Jain Institute of Management and Research (SPJIMR); Neeraj Gambhir, president, head-treasury & markets at Axis Bank; Rahul Bajoria, chief India economist at Barclays; Pronab Sen, former chief statistician; and Ashwini Kumar Tewari, MD of State Bank of India (SBI); discussed at length the RBI’s expected interventions in the bond market.
Gambhir said, “It is as dovish a policy as it can get in the current circumstances and the RBI has gone the extra mile as far as reassuring the market is concerned, the fact that they will be there to support both the bond market as well as the foreign exchange (FX) market.”
Meanwhile, Bajoria said, “The RBI has tried to balance the short-term interest of the heightened uncertainty around growth with giving assurance on the liquidity front.”
Narayan said that the RBI is trying to manage the conflicting environment. “The governor repeatedly said during the press conference that RBI is trying to manage conflicting targets and requirements and that’s the real dilemma in the medium-term for the RBI.”
According to Tewari, there is not going to be any reduction in deposit rates. “I do not think we are going to see any reduction in deposit rates; they have already bottomed out in my view. Inflation expectations or inflation – where it stands and the projections as have been given; I think there is no case for a reduction in deposit rates,” he said.
For entire discussion, watch the video