New Delhi: The Reserve Bank of India on Friday kept the key policy rates unchanged in its bi-monthly Monetary Policy review.
The central bank announcing the outcome of its bi-monthly Monetary Policy rates on October 9 said that it has decided to keep the repo rate unchanged at 4 percent and the reverse repo rate at 3.35 percent. RBI will continue with its accomodative stance.
The three day RBI Monetary Policy Committee (MPC) meeting was held from October 7 to October 9. RBI had postponed the MPC meeting last week, which must have a quorum of four, as the appointment of independent members was delayed.
The RBI Monetary Policy announcement by the Central bank comes after the government filled the vacancies of three external members in the committee on Monday. The government on Monday appointed Ashima Goyal, Jayanth R. Varma and Shashanka Bhide as members of the Monetary Policy Committee of the RBI.
Here is how Industry leaders reacted
Dinesh Kumar Khara, Chairman, SBI
Today’s policy statement by RBI is a perfect exposition of doing “whatever it takes” to revive growth. With growth projections at -9.5 percent and inflation set to be higher at least for now and the possibility of renewed infections in many countries, the monetary policy committee has righty chosen to keep the policy stance accommodative and relying more on discretion based policy responses rather than being strictly rule-based.
Axis Asset Management
RBI commentary, policy action through OMO’s and devolving G-Sec issuances are a clear indication that RBI intends to keep rates range bound. The end of the rate cut cycle, also signals the end of the capital gains story across most of the fixed income space especially G-Sec/AAA assets. From here on, we believe investors will be best suited to go up the duration curve which would serve investor needs of a higher risk reward. We anticipate the RBI will maintain rates at current levels for the next 18-24 months’ post which we believe a gradual rising rate environment will ensue on the back of a recovery in the economy. The RBI has continued open market operations i.e. ‘Operation Twist’ to normalize the curve. The action has borne fruit as we see a gradual retracement across the corporate & G-Sec curves. Under these circumstances, we believe the longer end of the curve will likely remain anchored at current levels.
Lakshmi Iyer, Chief Investment Officer (Debt) & Head – Products, Kotak Mahindra Asset Management Company
As expected, the MPC decided to maintain a status quo on benchmark rates. The RBI has reiterated the non-disruptive conduct of the government borrowing programme. To this effect, the OMO amounts have also been increased to Rs 20,000 crore. On Tap TLTRO for bonds is a great liquidity booster and would be good for the corporate bond segment. OMOs in state development loans (SDLs) is a fantastic move and can help bring down spreads v/s central government bonds.
Naveen Kukreja – CEO& Co-founder, Paisabazaar.com
The series of announcements made by the RBI Governor in the October MPC meeting will help improve credit flow to the housing, priority sector and small business segments. The decision to allow 24/7/365 availability of RTGS systems from December 2020 and perpetual validity of Certificate of Authorisation (CoA) issued to non-bank Payment System Operators (PSOs) will further boost the digital payment ecosystem.