The Reserve Bank of India in a move towards normal liquidity operations on Wednesday decided to restore market hours – from 9.00 am to 5.00 pm – in respect of call/notice/term money, commercial paper, certificates of deposit, and repo in corporate bond segments of the money market as well as for rupee interest rate derivatives.
“The extension of time for HTM categorisation of fresh Bank investments in bonds till March 2024, paves the way for stability in the bond market /Financial sector and future Government Borrowing. Overall pragmatic revisions of the monetary policy by RBI considering the uncertainties and volatility both at domestic and international fronts,” said Jyoti Prakash Gadia, Managing Director at Resurgent India.
Meanwhile, the Reserve Bank of India’s key repo rate was raised by 35 basis points (bps) today as widely expected, the fifth straight increase, with the central bank vowing there will be no let up in its fight to tame high inflation.
The monetary policy committee (MPC), comprising three members from the RBI and three external members, raised the key lending rate or the repo rate to 6.25% in a majority decision. Five of the six members voted in favour of the increase.
RBI Governor Shaktikanta Das said the main risk was that inflation would remain sticky and elevated.
“The MPC was of the view that further calibrated monetary policy action was warranted to keep inflation expectations anchored, break core inflation persistence and contain second round effects,” Das said as he announced the monetary policy committee’s decision.
“The focus on inflation control continues. There will be no let up in our efforts to bring inflation to more manageable levels,” he added.
The MPC lowered its GDP growth projection for financial year 2022/23 to 6.8% from 7% earlier, while its retail inflation forecast was held steady at 6.7%.
“Growth in India remains resilient in the international environment. A 6.8% growth (rate) is robust,” Das said.
“Withdrawal of the accommodative stance, and continuing to target inflation by the RBI is positive for the economy in the long term. RBI’s stance is assured while being cautious.The banking sector should continue to benefit from the robust margins and continuing credit growth from retail as well as corporates. The rate hike is broadly on the expected lines. This should be a status quo announcement for the markets. Markets will now take lead from the US Fed verdict in the coming week,” said Divam Sharma, Co-Founder at Green Portfolio.