RBI’s accommodative stance to revive growth on durable basis, say bankers

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December 4, 2020 8:03 PM

Indian Bank's MD & CEO Padmaja Chunduru said the tone remains dovish though the repo rate change was kept on hold with a promise to take steps to boost growth.

RBI, RBI news, RBI Updates, RBI latest, Reserve Bank of India, Indian Bank, HDFC, Union Bank of India, Banks, Banks in IndiaThe RBI revised its growth outlook, seeing a milder 7.5 per cent contraction in the fiscal year to March 2021 as opposed to its October forecast of a 9.5 per cent shrinkage of the GDP.

The RBI’s decision to continue with its accommodative stance this fiscal as well as the next year will ensure a sustainable economic growth, bankers said on Friday. The Reserve Bank of India (RBI) on Friday left the repo rate unchanged at 4 per cent for a third straight meeting as inflation remains stubbornly high. However, the central bank said its accommodative stance has been maintained to revive growth on a durable basis and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.

“The RBI policy of maintaining the status quo was expected but the continued forward guidance of an extended accommodative stance will continue to serve the markets well,” State Bank of India’s Chairman Dinesh Khara said. IBA Chairman and Union Bank of India’s Managing Director and CEO Raj Kiran Rai G said the RBI has clearly indicated continuation of accommodative stance during the current financial year and into the next financial year to revive growth on a durable basis while containing the inflation in the prescribed range.

“This gives clarity to the market on the rate front. Evolving macro-economic dynamics augurs well for maintaining the status quo on policy rates,” he said. Standard Chartered Bank’s CEO Zarin Daruwala said RBI reiterated its commitment to shore up economic growth by continuing with its accommodative stance and ensuring surplus system liquidity.

Echoing the sentiments, Punjab National Bank’s Managing Director and CEO CH SS Mallikarjuna Rao said, “The accommodative stance has been maintained into the next financial year in order to ensure durable economic growth.” Rai further said on the price front, elevation in consumer prices has been acknowledged by the central bank as economic activity is getting normalised which could lead to increase in demand. “Nevertheless, the policy assessments are well balanced and have given comfort to the markets,” he added.

Indian Bank’s MD & CEO Padmaja Chunduru said the tone remains dovish though the repo rate change was kept on hold with a promise to take steps to boost growth. Bank of India’s Managing Director and CEO A K Das said the policy, while maintaining an accommodative stance and keeping benchmark rates steady, aims at financial stability.

The RBI revised its growth outlook, seeing a milder 7.5 per cent contraction in the fiscal year to March 2021 as opposed to its October forecast of a 9.5 per cent shrinkage of the GDP. HDFC Bank’s Chief Economist Abheek Barua said the absence of any major liquidity absorption measures in the midst of a prolonged inflationary episode and indeed the upward revision of both the RBI’s growth and inflation forecasts might be somewhat puzzling.

Moneyboxx Finance co-founder Mayur Modi said while the economic recovery has kick-started, it is the rural economy which is the brightest of all the segments. In this context, it heartening to note that RBI has now allowed regional rural banks (RRBs) to access the Liquidity Adjustment Facility (LAF) window, he added. “The move will immensely benefit the rural economy, which in turn will also boost the broader economy,” he noted.

Religare Enterprises’ Head- Strategy, M&A, Investor Relations, Mayur Dwivedi, said while RBI has acknowledged there are signs of economic recovery in the second half with GDP seen returning to growth from contraction in first half, the same needs to supported by policy action in medium term as well. Tata Capital MD and CEO Rajiv Sabharwal said RBI clearly acknowledges the need to further incentivise demand for a broad-based activity pickup.

 

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