The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged in its February policy meeting, Governor Shaktikanta Das said. 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.

Share Market Live

NSE

The MPC in its meeting voted unanimously to keep policy rates unchanged. A majority of 5:1 felt it would be better to continue with an 'accommodative' stance. The 'accommodative' stance could continue for as long as necessary to revive growth, said Das while announcing the policy. FY22 CPI inflation forecast was left unchanged at 5.3 percent, while Q4 FY22 forecast remained unchanged at 5.7 percent. The RBI expects CPI inflation for FY23 to be at 4.5 percent.

In an interview to CNBC-TV18, Abheek Barua, chief economist at HDFC Bank, Jayesh Mehta, country head at Bank of America, and Ashwini Kumar Tewari, MD, SBI, discussed the RBI's monetary policy at length.

First up, Barua said, “The inflation number is a tad optimistic but more than the levels of inflation, it is the trajectory of inflation which is a downward sloping glide path; I think it is a very forward-looking policy. It’s looking at the glide path saying that we are getting there, along a steady path.”

Also Read: RBI Monetary Policy: Central bank leaves repo rate unchanged; Guv Das says inflation expected to peak in Q4

Meanwhile, Tewari said, “Our decisions are driven largely by demand and supply and as to how we see deposits coming in. As you are aware, we did increase one maturity of one to two years by 10 bps and on the bulk rates also, we have increased because wherever we see that there is supply from the deposit side, we will take that decision."

"However, if the RBI changed any rate, definitely the market would have reacted and we would have also reacted. As of now, I don't think we are going to react to this policy, it is on expected lines. There is no change. If we see that there is a need for increasing a particular maturity, we might do that, as we have done earlier. So, we don't see any trigger in this policy at this time," he mentioned.

Mehta said, “Extremely dovish. If the borrowing program was not so large, market would have reacted may be much larger, maybe by another 10-15 bps. But everybody feels that they should have said something on the bond borrowing program but why waste the bullet right now because that pain is going to start from April."

He added, "So in another 50 days, let's focus on the liquidity side of it, which was made quite clear. That is also kind of creating room. We will know in April, that yes, they would create room for buying bonds. As and when you start doing a longer-term reverse repo, that is where - even if it is a little bit more on the liquidity side, but it will be absorbed by the longer-term reverse repo, so that could create some room there. But of course, as I said, the market will still look at April, May, June as to how RBI supports. "

Also Read: RBI maintains CPI inflation forecast for FY22 at 5.3%

"We will have to focus on bond borrowing program with the April policy and their action in May, June. At this juncture, in the medium-term - forget the borrowing programming. At 4-4.5 percent inflation trajectory, 6.5 percent 10-year looks very attractive. But then, we have to wait for the supply, how it gets managed, and that's where the game is,” he explained.

For the entire discussion, watch the accompanying video

First Published:Feb 10, 2022 1:27 PM IST