IGI Logo

Below View On RBI Monetary policy By Ajit Banerjee, Chief Investment Officer, Shriram Life Insurance.

The Reserve Bank of India has hiked the repo rate by 35 basis points to 6.25% which was on expected lines. However, markets were expecting a slight moderation in the stance but it continues to be the withdrawal of accommodative stance while supporting growth. This may be interpreted that further action on the rate front can still happen before arriving at the terminal rate. RBI also lowered its GDP growth forecast for FY23 to 6.8 percent from 7 per cent earlier. This is predominantly factoring in the global headwinds which prevail and would likely to impact India’s GDP growth. The inflation forecasts for the residual period of FY23 have been marginally increased from the previous forecast in view of the higher inflation level still prevailing.

Dispensation of the enhanced HTM limit at 23% for banks extended up to March 2024 will be a welcome step for the banking sector. The RBI Governor also gave caution to the market participants that this surplus liquidity should not be taken for granted hence the liquidity withdrawal will continue. Overall the tonality of the statement can be considered slightly hawkish in nature.

Above views are of the author and not of the website kindly read disclaimer