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Below the Views on RBI Monetary Policy Committee August 2024 By Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank

"The status quo on the repo rate is no surprise. The central bank was emphatic to underscore their commitment for further disinflation. They seem to be in no hurry to cut rates.

While RBI closely watches the heightened volatility in financial markets globally, it rightly avoids any knee-jerk reaction.

Given India’s generally strong macro backdrop including current account deficit of sub-1% of GDP, decent FII flows and a large forex reserve cushion, one feels that fundamentally INR is on a strong footing.

Growth in reserve money – the measure of primary liquidity infusion by the central bank into the banking system – has been markedly weak, often in a range of 6-8% y/y during the last two years. Given the trend of bank deposits growth lagging credit growth now for 28 straight months, one expects the RBI to step up the pace and quantum of primary liquidity infusion in the coming months in order to provide the desired quantum of liquidity for smooth functioning of the banking system."

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