RBI's policy stance effective, should bring inflation back to target, says IMF

The IMF said that the Indian financial sector has been resilient and largely unaffected by global financial stress in early 2023.

The Reserve Bank of India’s (RBI) monetary policy stance is appropriate and should gradually bring inflation back to target, the International Monetary Fund (IMF) has said .

“Directors commended the Reserve Bank of India’s (RBI) proactive monetary policy actions and strong commitment to price stability. They agreed that the current monetary policy stance, anchored on a data dependent approach, is appropriate and should gradually bring inflation back to target,” IMF said in its Article IV Consultation with India on December 18.

RBI on December 8 voted unanimously to keep policy repo rate unchanged at 6.5 percent, its fifth pause on the trot. All members of the monetary policy committee (MPC) voted in favour of remaining focussed on withdrawal of accommodation stance, while five out of six members voted in favour of continuing stance.

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The multilateral financial and economic institution said the Indian financial sector was resilient and largely unaffected by global financial stress in early 2023.

"The financial sector has been resilient, largely unaffected by global financial stress in early 2023. While the budget deficit has eased, public debt remains elevated, and fiscal buffers need to be rebuilt. Globally, India's 2023 G20 presidency has demonstrated the country's important role in advancing multilateral policy priorities," it said.

The financial sector remained stable and resilient, as reflected in sustained growth in bank credit, low levels of non-performing assets, and adequate capital and liquidity buffers.

The IMF called for continued supervision and the use of prudential tools to preserve financial stability, including rapid growth in unsecured personal loans.

“Directors broadly called for continued supervision and the use of prudential tools to preserve financial stability and manage emerging vulnerabilities, including rapid growth in unsecured personal loans. They advised further strengthening of regulatory and supervisory standards and encouraged public banks to continue building capital buffers,” IMF said.