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RBI monetary policy relates to the monetary matters of the country involving measures to regulate the supply of money, availability, cost of credit in the economy as well as distribution of credit and borrowing and lending rates of interest. The Monetary Policy Committee (MPC) for the tenth time in a row kept the policy repo rate unchanged at 4 per cent but, surprising the economists, the central bank also retained the reverse repo rate at 3.35 percent.
DOMESTIC GROWTH
As per RBI, going forward, government’s thrust on capital expenditure and exports are expected to enhance productive capacity and strengthen aggregate demand. This would also crowd in private investment. The conducive financial conditions engendered by the RBI’s policy actions will provide impetus to investment activity. The surveys done by the RBI reveal that capacity utilisation is rising, and the outlook on business and consumer confidence remain in optimistic territory, which should support investment as well as consumption demand.
INFLATION
MPC’s key mandate is to keep inflation within its target band of 4% to provide the necessary liquidity support for sustained domestic recovery. CPI inflation for 2022-23 is projected at 4.5 per cent with Q1:2022-23 at 4.9 per cent; Q2 at 5.0 per cent; Q3 at 4.0 per cent; and Q4 at 4.2 per cent, with risks broadly balanced.
STEERING TOWARDS HOMEOWNERSHIP
The continuation of low homeloan interest rate regime will support the ongoing recovery of the residential sector in the upcoming months with developers expecting an influx of new buyers as a result of the Government's focus on affordable housing in the budget. As per realty experts, the RBI move will solve the twin purposes of achieving ‘Housing for All’ goal while also giving helping hand to then real estate sector and in turn the allied sectors dependant on sector’s growth.
Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE believes that with the rupee being resilient in the face of global spill overs, RBI’s commitment to a sustained government borrowing program is admirable. There is an optimism that this steady stance would augur well for home loan borrowers and India’s real estate market.
FINANCIAL STABILITY
The Reserve Bank has accorded the highest priority to preserving financial stability by taking quick and decisive steps to ease liquidity constraints, restore market confidence and prevent contagion to other segments of the financial market. It has also been strengthening the regulatory and supervisory framework for both banking and nonbank financial sectors to proactively identify, assess and deal with vulnerabilities. However growth concerns continue to play a bigger role than inflation for RBI.
The Reserve Bank of India Governor Shaktikanta Das stressed that banks and NBFCs should strengthen their corporate governance and risk management strategies to build resilience in an increasingly uncertain economic environment as well as continue the process of capital augmentation. As per Yes Bank Chief Economist Indranil Pan observation, the RBI stance indicates its willingness to wait longer to see the growth becoming durable and sustainable.
However, a 2 repo rate increases in FY23 is foreseeable. Going forward, the conducive financial conditions engendered by the RBI’s policy actions will provide impetus to investment activity. This wouldnalso crowd in private investment. Then surveys done by the RBI reveal that capacity utilisation is rising, and the outlook on business and consumer confidence remain in optimistic territory, which should support investment as well as consumption demand
