The six-member Monetary Policy Committee headed by Reserve Bank Governor Shaktikanta Das is scheduled to announce the policy proposal on February 10.
reserve Bank of IndiaThe rate-setting panel began its three-day deliberations on Tuesday to decide the next monetary policy, inflation concerns and the evolving geopolitical situation in the backdrop of Budget 2022-23.
The six-member Monetary Policy Committee (MPC) headed by Reserve Bank Governor Shaktikanta Das is scheduled to announce the policy proposal on February 10.
The meeting, which was to begin on Monday, was postponed by a day in view of declaring February 7 as a public holiday to mourn the death of legendary singer Lata Mangeshkar in Maharashtra.
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It is widely anticipated that the MPC is likely to maintain status quo on the benchmark interest rate or the repo rate.
However, experts are of the view that the MPC may change the policy stance from ‘accommodative’ to ‘neutral’ and tinker with the reverse-repo rate as part of the liquidity normalization process.
If the RBI maintains the status quo in the policy rate on Thursday, it will be for the tenth time in a row that the rate remains unchanged. The central bank had last revised the policy rate on May 22, 2020, in an off-policy cycle to meet demand by cutting interest rate from historically low rates.
According to Brickwork Ratings, the RBI may continue with the policy rates at current levels in the upcoming policy meeting.
“We expect the MPC to start raising policy rates starting with normalization of the policy corridor between repo and reverse repo rate. We expect the RBI to hike the reverse repo rate in its April 2022 policy meeting.
The outlook on inflation and growth for the current fiscal may remain unchanged, while the statement on its further guidance on inflation and GDP for the next fiscal is eagerly awaited.
The last MPC, held in December 2021, had kept the benchmark interest rate unchanged at 4% and decided to continue with its accommodative stance against the backdrop of concerns over the emergence of the new coronavirus variant, Omicron.
The MPC has been tasked by the government to keep inflation in the range of 2-6%.
Citing a sharp pick-up in credit growth during the first half and a sharp fall in deposits and consequent rise in term currency rates, coupled with record high lending, an SBI report called for a 20 bps increase in the reverse repo rate outside the MPC Is. So that the central bank would find buyers for the new debentures of the flood.
Budget 2023 has pegged the Centre’s gross borrowing at a record Rs 14.3 lakh crore and 10.5 lakh crore for FY12, down from Rs 13.5 lakh crore in this fiscal, while with states, the gross borrowing will be Rs 23.3 lakh crore. And the net would be ₹17.8 lakh crore, the report said. It added that the budget seeks to pay Rs 3.1 lakh crore in the next fiscal, up from Rs 2.7 lakh crore in this fiscal.
While only during the first half of FY 2012, signs of loan recovery started showing, the latest data for the week of January 14, 2022 shows that the incremental credit of all banks increased by Rs 5.46 lakh crore, which is Rs. 2.72 lakh crore is more than double. In contrast, in the corresponding period of the previous fiscal, the report said, the incremental deposit growth was only ₹8.6 lakh crore, lower than ₹10.5 lakh crore.
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