New Delhi: The Reserve Bank of India (RBI) on Friday decided to leave benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance as the economy faces heat of the second COVID wave.
This is the sixth time in a row that the Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das has maintained status quo. RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.
Here is how Industry leaders reacted on RBI June Monetary Policy
Abheek Barua, Chief Economist, HDFC Bank
In today’s policy announcement, the RBI ticked all the right boxes in terms of its response to the second wave. The announcement of GSAP 2.0 for INR 1.2 lakh crore and the carve out for SDLs bonds in the program is likely to help ease the pressure in the bond market, especially given the higher state borrowing pressure and increase in Centre borrowings this fiscal.
Siddhartha Sanyal, Chief Economist and Head - Research, Bandhan Bank
In today’s policy, the RBI’s bias to continue extending the same was evident from the initiatives such as liquidity support to contact-intensive sectors and MSMEs and small businesses. Further step up in G-SAP and inclusion of SDLs in the same are encouraging and should continue to offer support for the broader spectrum of the yield curve.
Prithviraj Srinivas, Chief Economist, Axis Capital
To tackle likely pressures on domestic interest rates, the RBI highlighted presence of USD 600bn FX reserves as a deterrent ahead of crucial FOMC meeting and gave predictable indications on RBI bond buying program, G-SAP 2.0. In addition, there were other credit facilitation measures for severely impacted high contact services sectors. Overall today's measures and communication by RBI bolster current accommodative policy stance.
Lakshmi Iyer, CIO (Debt) & Head Products, Kotak Mutual Fund
The RBI MPC was about G & G – Growth forecasts for FY 22 were lowered by 1% while GSAP amt for Q2 FY 22 was increased to INR 1 tn (INR 1 tm in Q1). While CPI inflation forecasts have been increased, immediate demand side pressures may not be a concern due to the pandemic. Inclusion of SDL is GSAP is a good move to help ease some pressure on State loans. Bond yields are likely to move in tight range and oscillate between auction supply and GSAP led demand.
Churchil Bhatt, EVP & Debt Fund Manager, Kotak Mahindra Life Insurance Company
On the bond market front, RBI re-emphasized its guidance on orderly evolution of Yield Curve with the announcement of INR 1.2 Trillion GSAP 2.0. We expect bond markets to take comfort from continued RBI support. In light of the above, 10Y Benchmark Gsec should continue to trade in 5.90%-6.10% range in the near term.
Amar Ambani, Senior President and Head of Research – Institutional Equities, YES SECURITIES
Downward revision in FY22 GDP growth projection to 9.5% was quite expected, but seems little optimistic when compared with consensus estimates. Nevertheless, RBI pursued its broad intent of plugging weak spots in the economy by providing on tap liquidity with additional lending to distressed and contact-sensitive sectors.
George Alexander Muthoot, Managing Director at Muthoot Finance
The commitment by the central bank was supported by additional measures announced today such as a separate liquidity window of Rs. 15,000 crore for certain contact-intensive sectors and enhancing exposure threshold to Rs. 50 crore from Rs. 25 crore for MSMEs, small businesses and individuals for business loan purposes under Resolution Framework 2.0. Such steps will help borrowers to better mitigate the impact of pandemic’s second wave and we stand resolutely with every Indian to support all finance needs for a truly Atmanirbhar Bharat.
Pankaj Sharma, Chief Executive Officer (CEO), Religare Finvest Ltd
RBI’s move to enhance the overall exposure from INR 25 crores to INR 50 crores under Resolution Framework 2.0 is expected to help more MSMEs, non-MSMEs and individuals who have taken loans but have been impacted by the pandemic. This will help bring down systemic risks in the banking system.
Harsh Vardhan Patodia, President, CREDAI National
Modifying the ECLGS scheme and clear instructions to banks & other financial institutions on sanctioning funds to labour intensive sectors like Real Estate is the need of the hour. Mortaorium on pricipal & interest for 6 months and freezing of SMA classification for another year will aid revival of businesses and thus the economy.