RBI Monetary Policy Feb 2022 Announcements, MPC Meeting Outcome: Reserve Bank of India (RBI) on Thursday kept the benchmark interest rate unchanged at 4 per cent and decided to continue with its accommodative stance in the backdrop of an elevated level of inflation.
Here are all the developments on RBI Monetary Policy Feb 2022 Announcements, MPC meeting outcome, major decisions and reactions:-
Shanti Ekambaram, Group President – Consumer Banking, Kotak Mahindra Bank Ltd
“The RBI’s monetary policy committee (MPC) has continued with an “accommodative stance” while maintaining status quo on key rates. The RBI has signalled that it will continue to support economic growth as long as required.
Policy outlook is stable but the narrative is slightly different from what the markets had expected. The real GDP growth for FY23 – seen at 7.8 per cent – seems conservative. Retail inflation is expected to peak in Q4 FY22 to 5.7%. However, it is likely to glide down over the next few quarters and is projected at 4.5% in FY23. While risks of higher crude prices remain, overall growth and inflation is estimated to be stable through FY23.
The rigour of vaccination, enhanced capex and infrastructure build-out by the government would ensure increased return to normalisation even while demand pull is still relatively muted.
MPC’s key mandate is to keep inflation within its target band of 4% to provide the necessary liquidity support for sustained domestic recovery. With RBI sending dovish signals, interest rates are likely to be stable in the short-term and RBI is likely to adopt a calibrated approach.”
Pranay Jhaveri, MD, India and South Asia, Euronet Worldwide
Built on UPI rails, e – Rupi removes friction, works in an offline mode, and enables the large population of people receiving DBT to grow their digital payments footprint. This step of raising the e- Rupi limits to 1 lakh would accelerate DBT dissemination by the Government and allow accrual, ultimately resulting in improved welfare of the underprivileged section of the economy.We have built this capability on our UPI platform and the same can be leveraged by our banking partners.
Pramod Kathuria, Founder & CEO, Easiloans
“The Feb-22 monetary policy announcement from RBI was much awaited especially post the financial budget. Coming directly to the part which impacts home loans and real estate i.e. the rates. The RBI decision of keeping the repo and reverse repo rates unchanged is a hugely positive signal for the home loan sector and consequently for the real estate segment. Unchanged rates at a time when home loan interest rates are at a 10-year low is an impetus for homebuyers to go out there and purchase a home in the next few quarters. This will add to the growth outlook for real estate developers for the coming months while as banks or fintech enable digital loans, this is an opportunity to build further on the momentum generated over the last year. Overall, a positive move by the RBI and I could already see an upward trend in key realty and banking stocks following the announcement.”
Anshuman Narain, Vice-President, Cashbean (P.C.Financial Services Pvt. Ltd.)
“Great move by the respected regulator to keep the interest rates unchanged. This will surely help further stimulate the post-COVID Indian economy by keeping the flow of cash going steady for both individual and institutional borrowers. The financial services sector should definitely see this as a vehicle for further growth and investments.”
Neha Khanna, Director, ValPro
“The accommodative stance from policy makers with no big changes are key for the markets. With the budget behind us and the resilience of the economy albeit a third wave, the economic growth will continue to be reflected in the performance of companies. The bounce back from the third wave will be accelerated by the support from the government. We’re bullish on the listed markets and anticipate a growth spree through the remaining part of FY22 and continuing through FY23.”
Jyoti Roy – DVP- Equity Strategist, Angel One Ltd.
“The RBI in its MPC kept the repo rate and the reverse repo rates unchanged at 4.0% and 3.35% respectively. While the decision to keep repo rates unchanged was in line with expectations markets were expecting a 25bps hike in the reverse repo rates to 3.5%. The RBI expects GDP growth for FY23 to be at 7.8% while they expect inflation to peak out in Q4FY2022 at 5.7% before moderating to 4.5% in FY2023, though hardening crude prices could pose upside risks to inflation. The RBI also maintained that they will continue to use variable rate reverse repo (VRRR) as the main instrument for draining out excess liquidity from the markets. Limits under the Voluntary Retention Route (VRR) have also been hiked from ₹1.5 lakh crore to ₹2.5 lakh crore with effect from April 1, 2022. This will provide access to additional sources of capital for the domestic debt market including g-secs. The RBIs decision not to hike reverse repo rates and keep an accommodative stance surprised the markets as the RBI was largely expected to change its stance to neutral. While the RBIs decisions came as a pleasant surprise for the markets, concerns remain over-aggressive Fed tightening, large Government borrowings along with upside risks to inflation due to high commodity and crude prices.”
Mandar Agashe, MD, Founder & Vice-Chairman of Sarvatra Technologies ltd
“e-RUPI is a great innovation on the UPI platform. It can be seamlessly availed even in the absence of a bank account, smart phone or internet connectivity and therefore, is an excellent instrument to drive financial inclusion at the last mile. e-RUPI was launched last year on a pilot basis primarily for Covid-19 vaccination purposes. Now that it has witnessed success for Covid-19 vaccination use-case, RBI has increased the cap from 10k to 1 lakh and has also converted it into a multi-use payment voucher, thereby extending its utility across a wide range of new use-cases that will emerge over time. e-RUPI is an excellent initiative whereby a host of services including welfare services can be extended directly to the beneficiaries on their mobile in the form of an e-voucher powered by UPI. Thus, a contactless and cashless prepaid digital payment system will go a long way in bringing people without a bank account, a smartphone and internet connectivity to UPI.
Additionally, this will also interest the private sector and MSMEs to deliver employee benefits besides exploring a wide range of B2B transactions. Also, the new payment medium can be controlled and therefore, despite raising the cap or using it more than once, the issuer can ensure the amount is spent for the allocated purpose and can track the redemption. The proposal would expand the usage of digital payments, especially to India’s most remote locations, propelling the country closer to its long-held goal of being a cashless economy.”
Marzban Irani, CIO – fixed income, LIC Mutual Fund Asset Management
o Governor mentioned that inflation is temporary. Will decline in medium term.
o Since there is less borrowing till March 22, market should remain range bound.
o Global bond yields and oil will give direction to the market in the short to medium term.
The actionable for retail investors from the RBI’s policy is one, they should remain cautious due to huge borrowing starting April 2022, even as global yields and commodity prices remain elevated. Secondly, they should avoid locking in long term debt investment at current yields. This translates into retail debt investors taking exposure in debt schemes with duration of 1 to 3 years three years depending on individual risk appetite
Richa Roy, Partner, Cyril Amarchand Mangaldas
“The RBI’s move to keep rates unchanged is an extremely progressive one, that heralds stability and continuity in light of domestic and international developments. In the shadow of the Union Budget, it indicates continued access to low-cost credit which will power growth and optimism.
Additionally, in the Governor’s statement, the emphasis on financial stability, proactive regulatory and supervisory frameworks for vulnerabilities in the banking and non-banking finance sector complements the various initiatives taken this far to address regulatory infirmities and arbitrage. The Governor lauded the more robust balancesheets with better capital adequacy and lower NPAs. There is an opportunity for this to be supplemented with ARC reform which the RBI has taken steps towards as well as augmention of the NCLT infrastructure. The RBI’s continued attention on liquidity, governance, risk management and resolution of banks and NBFCs is heartening as multiple institutions continue to undergo resolution.
The enhancement of the VRR limits will add depth and liquidity to the corporate bond market, increasingly an important source of credit to industry. The CDS guidelines will also deepen and add maturity to the corporate bond market
Finally, RBI continues its focus on Fintech with the issuance of Master Directions on Outsourcing on Information Technology Governance, Risk, Controls and Assurance Practices which will add safety, security and stability to financial transactions undertaken by through the financial system. In subsequent statements, the Governor reiterated concerns around cryptocurrencies. It is hoped that the regulatory framework for crypto will compliment other moves by RB and the Government”.
Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance
“Overall an Ultra Dovish Policy with an overarching focus on ‘’Durability of Growth”. The dovish verdict comes at a time when the MPC is juxtaposed with a higher than expected government borrowing in FY23 and has chosen to stay put and not react to the incumbent global and domestic pressures warranting for maneuvering of the monetary policy. Belying the market expectations of a reverse repo rate hike, MPC has continued with its effective stealth tightening by way of Variable Rate Reverse Repo (VRRR’s) and has chosen to preserve its ammunition for later, and play the waiting game for now. While the lower Inflation forecasts coupled with the accommodative status quo have imparted short-term respite to the reeling bond markets post the Union Budget, we reckon the upside risks to Inflation may have been downplayed by MPC. “
Dr. M Govinda Rao, Chief Economic Advisor, Brickwork Ratings
“The decision to hold policy rates by the MPC is on expected lines. The RBI’s continued focus is on reviving growth reinforced by potential downside risks to economic activity from the highly contagious Omicron variant. Improving inflation outlook provides comfort for the RBI to continue with the current policy stance. The MPC was of the view that continued policy support is warranted for a sustained, durable and broad-based recovery. On the GDP guidance, the RBI forecasts 7.8% growth for FY23, which is slightly lower than the 8% to 8.5% GDP forecast made by the Economic Survey 2021-22. This, in part, maybe due to the base effect arising from the revision of GDP for 2020-21 from (-) 7.1% to (-) 6.6%. The growth concerns arising from the uncertainties related to Omicron and global spillovers, has warranted the RBI to maintain the policy rate stable to sustain the economic recovery. It has sounded a note of caution, as the persistent increase in international commodity prices, the surge in the volatility of global financial markets, and global supply bottlenecks can exacerbate risks to the outlook. On the inflation front, the RBI sees prices softening from the current levels and forecasts an 4.5% inflation for FY23. The expectation of inflation moving within the MPC’s upper range provides scope for the continuation of the accommodative policy stance. However, the forecast on inflation is highly dependent on normal monsoon and stability in international commodity prices including other domestic factors like demand and supply situation”.
George Heber Joseph, CEO/CIO, ITI Mutual Fund
Today’s MPC meeting decision to keep the repo rate unchanged and continue with the accommodative stance was expected, but the decision to not increase the reverse repo rate is a positive surprise. The RBI Governor’s accompanying statement was as dovish as it could be in current conditions. Central Bank focus remains on active liquidity management to anchor “effective” policy rates and significance of reverse repo seems to have diminished in present times. Near term bond market apprehensions seem addressed by today’s policy, but fears related to the smooth conduct of coming year’s government borrowing programme are likely to remain in a global headwinds’ era.
Seema Prem, Co-founder & CEO, FIA Global
The Reserve Bank of India’s decision to keep repo rates unchanged and maintaining the ‘accommodative’ stance is a move that is supportive of growth. It is clear that the focus is on market profits for banks and on keeping inflation on check. Given the budget’s bent towards digital banking services, the biggest beneficiaries of this move will be fintechs in the financial inclusion space, due to the overall positive economic environment, especially, given that the Omicron worry is now behind us.
Price stability also remains the cardinal principle for RBI to keep liquidity at optimal levels. I believe we are looking at a more durable and a broad-based recovery keeping in mind inflationary growth. It is a comfortable stance and will look to improve uncertainties with regards to the omicron variant.
Vinit Dungarwal, Director, AMs Project Consultants Pvt. Ltd.
By leaving the rates unchanged and continuing the accommodative stance MPC has sent out a clear signal that they are focused on the long-term growth of the economy. The projections also indicate that inflation is on a downward trajectory, which is another positive indicator. We welcome this move by RBI as it helps in holding the interest rates and sustaining the current growth momentum in the real estate sector. This move will help in improving affordability, lead to demand generation and have a multiplier effect on the overall economy.
Lincoln Bennet Rodrigues, Chairman & Founder, The Bennet and Bernard Company
The continued intervention by RBI and holding on to the rates has helped in demand generation in the real estate sector. Economic growth needs to be supported through monetary policy and this is the foremost reason that the RBI has continued its accommodative stance which has invoked a sense of optimism. This works well for all home loan borrowers as the environment of affordability will continue and will not harden anytime soon. The continuation of low home-loan interest rate regime is bound to instill more confidence to the home buyers and support the ongoing market and economic recovery which has been promising in the recent past. This should augur well for home buying sentiment as it is quite clear that increasing interest rates would impact overall demand at a time when the government is keen to boost consumption. The green shoots of economic revival coupled with the prevailing low interest rates will continue to be conducive for the residential sector. We also hope that the government looks into specific measures to support developers and continue to boost residential real estate uptake in the upcoming months.
Dinesh Khara, Chairman, SBI
“The RBI policy statement is an affirmation to keep the rate structure at reasonable levels to support an incipient growth recovery. Amidst global uncertainties, the policy has provided admirable support to market sentiments and has rightfully indicated it has enough non conventional measures to keep the demand supply of g-secs in reasonable balance. The regulatory guidelines of credit default swap and rupee derivatives market will ensure a deepening of markets. The enhancement of cap under e-RUPI could facilitate a faster adoption of digital transactions, that could eventually usher in a roll out of digital rupee.”
Sanjeev Arora, Director, 360 Realtors
RBI and the government have taken a host of liquidity-building steps and iterations of rate cuts in the past, which augured well for the Indian economy. In FY 22, the Indian economy is set to grow at 9.2% and is touted as one of the fastest and most attractive economies in Asia. Moreover, Sensex is looking strong and will cross 100,000 in the next 5 years, as per reports by leading investment houses. This further indicates that the Indian economy is on a strong footing. Meanwhile, the government should consider that a FED rate hike might impact the economy adversely. Moreover, the rise in oil prices will also weigh on the economy. Hence, regulatory agencies can consider the option of lowering rates to further support growth. Moreover, inflation is still within the safe boundaries, which further gives RBI space to maneuver. Healthy economic growth and focus on spending will always boost the realty demand.
Pradeep Aggarwal, Co-Founder & Chairman, Signature Global and Chairman – ASSOCHAM National Council on Real Estate, Housing and Urban Development
“With current market circumstances, the apex bank’s accommodative stance on the status quo and holding the repo and reverse repo rates unchanged is an honorable and cautious move. We predict that housing will experience a huge influx of new buyers as a result of the Government’s focus on affordable housing, which was evident even in the Budget.”
Vikas Garg, Deputy Managing Director MRG World
Low home loan rates have benefited buyers of affordable homes; the trend is expected to continue, which is excellent news for the segment that sees the most demand. The market is robust and has begun to pick up speed, which will continue to improve. We expect strong sales as consumers want to take advantage of the low rates before they rise.
Reference Link:= https://www.zeebiz.com/india/live-updates-rbi-monetary-policy-feb-2022-announcements-live-latest-updates-on-mpc-meeting-outcome-178458