Siddhartha Sanyal : Maintaining status quo on policy rates a prudent move by MPC

Insight Online News

Kolkata, Dec 08 : Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank, commenting on RBI’s monetary policy announcement, today said, ” Maintaining status quo on policy rates had been a prudent move by the MPC, especially amid fresh uptick in Covid-related uncertainties globally. “

” The RBI rightly indicated that economic activities in India are on the mend but still need policy support. As expected, withdrawal of crisis time liquidity was further stepped up in December with plans of larger quantum of VRRR auctions, ” he added.

” While the reverse repo rate was kept unchanged, today’s meeting further strengthened the groundwork for a change, potentially in the February meeting. The larger VRRR quantum will effectively lead expectations for higher money market rates; and this may lead to only a minor disruption when the reverse repo rate is finally adjusted upward by a small quantum, ” he stated.

” Overall, the process of normalization of monetary policy remains nuanced and gradual, even if erring on the side of caution, rather than being a source of surprise, ” he mentioned.

S. S. Mallikarjuna Rao, MD & CEO, PNB, said, ” As expected, the benchmark rates were kept unchanged with accommodative stance. The economic outlook sounded more optimistic as the major indicators such as agriculture and allied activities, spending on travel and tourism, GST receipts and air passenger traffic indicated a more robust and broad-based recovery. The persistently high core inflation however remained a key figure determining the path of policy. “

” The liquidity measures such as fortnight guidance on 14-day VRRR auctions and re-establish it as the main liquidity management operation, banks given with one more option to pre-pay outstanding funds availed through TLTRO 1.0 and 2.0 scheme are a welcome and calibrated steps towards liquidity normalization, ” he added.

” Measures such as RBI approval not required by banks prior infusing capital in overseas branches and subsidiaries, initiation on Streamlining of charges in the digital payment system, bringing feature phone users into the mainstream digital payments, enabling small value transactions through wallet, enhancing the transaction limit for payments through UPI for Retail Direct Scheme and IPO applications are all steps towards a more conducive, affordable and inclusive banking. “

UNIINDIA

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