RBI Monetary Policy News Highlights: Feedback from the wholesale CBDC pilot has been very satisfactory, says Das

Akash Sinha, CEO & Co-founder, Cashfree Payments:

"RBI’s announcement with respect to UPI payments and Bharat Bill Payment System (BBPS) are encouraging in the payments ecosystem. The RBI’s announcement around increasing the capacity of UPI by introducing single-block and multiple debits functionality, will enable users to block funds in their account, which can be debited at the time of need. This will make it more convenient to make payments towards investments in securities through the RBI’s Retail Direct platform and e-commerce transactions. RBI has been working towards boosting the efficiency and effectiveness of BBPS, to facilitate and accelerate the adoption of cashless payments and today’s announcement to expand its scope will further aid in increasing the accessibility for a wider set of individuals and businesses. India, as an economy, has already witnessed a rapid rise in the digital payments, logging 23.06 bn transactions amounting to Rs 38.3 lakh crore in the third quarter this year. RBI’s recent efforts with respect to digital payments will certainly contribute towards the cashless economy imperative."

Mr Anand Varadarajan, Director, Acit C Mehta Financial Services Ltd:

"The Reserve Bank of India hiked the repo rate by 35 bps to 6.25% on December 7/today, continuing its fight against inflation. In the current financial year, the RBI has increased repo rate from 4.0% to 6.25%, however, the pace of rate is reduced from 50 bps in the last 3 hikes to 35 bps in this meeting.

This reaffirms our view that the US Fed would increase the rates by 50 bps in its meeting scheduled next week. Globally, the equity markets have factored this to some extent which has resulted in the rally in the last few weeks.

On a macroeconomic front, this will increase the cost of funds for financial institutions and thereby result in increased interest rates and EMI for people/households. This in turn should reduce demand and inflation due to lower purchasing power in the hands of consumers.

From an investor perspective, fixed income investors would benefit from high interest rates from FDs, debentures, bonds, etc. While equity investors will need to realign their investments from rate sensitive sectors like auto, consumer discretionary, etc"

Zarin Daruwala,Cluster CEO, India and South Asia markets (Bangladesh, Nepal and Sri Lanka), Standard Chartered Bank,said, “The MPC’s decision to hike repo rate by 35 bps has struck a delicate balance between reining in inflation within the 2-4% band and avoiding a premature pivot to support growth. RBI’s confidence around India’s GDP (rural and urban) and external sector augurs well for the economy even as global growth slows. We may continue to see rates at higher levels as RBI continues to remain vigilant on inflation.”

Among the initiatives announced, the extension of the enhanced held to maturity (HTM) limit by a year will help stimulate demand for Gsecs and also lend stability to yields. The enhancements to UPI mandates and enabling recurring payments on Bharat Bill Payment System (BBPS) will increase the acceptance of digital payments, especially for services such as hotels, education fees, rent payments, tax payments etc.”

Mr. Dinesh Khara, Chairman, SBI:

“The RBI policy statement is nuanced, nimble, forward looking and ensures a fine balancing tradeoff between growth and inflation. A marginal downward revision in growth estimates reveal that the only certainty in the current environment is uncertainty. A visible improvement in consumer and business confidence as per RBI surveys augurs well for the future growth outlook. Imparting operational flexibility to banks in managing their investment in HTM limit will have an orderly impact on domestic yields. The steps to augment the payment infrastructure will ensure a continued traction on digital front.”

Anita Gandhi, Director and Head, Institutional Business at Arihant Capital, said, "RBI governor has mentioned that they will closely watch inflation dynamics & be ready to act as may be necessary. Their actions will be in the interest of economy keeping growth in mind. This sounds very logical & satisfactory. However, the entire globe is undergoing high inflation phenomenon & resultant rate hikes. Maintaining growth momentum in such times is challanging & therefore we may see swich to value stocks during such times."

Dr. Poonam Tandon, Chief Investment Officer, IndiaFirst Life Insurance:

Even though RBI has been in an absorption mode, it will remain nimble and flexible in its liquidity management. Other measures include – 1) enhanced HTM limits for banks extended up to Mar 2024, 2) scope of Bharat Bill Payment System expanded and 3) resident entity allowed to hedge gold price risk. Overall, the policy tone was cautious and data dependent with RBI emphasizing to calibrate policy as needed.

Sumit Chanda, Founder and CEO, JARVIS Invest:

“The 35bps repo rate hike was expected, however the RBI maintained its hawkish stance on inflation being sticky and the need to maintain its vigil on inflationary expectations. The RBI maintained CPI inflation level projection for FY23 at 6.7% while lowering the FY23 GDP projection to 6.8% from 7% projected earlier. The markets did not react to the news since the policy was in line with their expectations. India continues to be the fastest growing economy in the world, investment activity is gaining traction, rural demand is recovering, and corporate earnings have been good. Global commodity and crude prices have moderated recently, although the trajectory will be keenly watched. We continue to believe that India equity markets are poised to hit new highs. Good time to be invested in equities but stick to asset allocation.”

Avinash Godkhindi, MD and CEO, Zaggle:

“While the RBI continues to maintain its hawkish tone on inflationary expectations, RBI’s repo rate hike by 35 basis points was on expected lines. Despite the RBI slashing FY23 GDP projections from 7% to 6.8%, Indian economy remains resilient and is still among the fastest growing major economies in the world. The global environment remains challenging, however we are confident about India growth story given the relatively strong macro fundamentals, traction in investment activity, robust financial system, healthier banks and corporate India. Broader policymakers support to the Indian startup ecosystem is another positive.

The success of UPI has been outstanding and praised globally and UPI has emerged as one of the most popular retail payment system in India. RBI’s decision to further enhance UPI by introducing a single-block-and-multiple-debits functionality will further boost the digital payments infrastructure in the country. This will significantly enhance the ease of making payments in e-commerce space and building higher trust in transactions as merchants can be assured of timely payments while the funds remain in the customer’s account till actual delivery of goods or services. Further the RBI has enhanced scope of Bharat Bill Payment System (BBPS) to include all categories of payments and collections, both recurring and non-recurring in nature. With this, the platform has now become accessible to wider set of individuals and businesses who can now benefit with faster fund access and improved efficiency. This will make the entire payments experience transparent and will lead to robustness and growth of India’s payment infrastructure”

“Given the backdrop of continued geopolitical challenges on the global front, it is heartening to see RBI’s outlook on the Indian economy remaining resilient and drawing strength from strong macroeconomic fundamentals. With the world economy still marked by shocks, the RBI has announced the fifth consecutive hike in repo rate with an increase of 35 bps to 6.25%, along with a focused stance on withdrawal of accommodation. In line with our expectations, the RBI governor further retained the inflation projection at 6.7%, and lowered the FY23 GDP forecast to 6.8% from 7% earlier. However, driving the confidence from recovery seen in rural demand and rise in urban consumption, resilience in the agricultural sector, improvement in consumer confidence, traction in investment activity, we are optimistic about the broadening of economic activities which bodes well for demand for gold loans and pick-up in demand for credit. With rural demand recovering and strong improved consumer confidence, we believe that we will continue to witness the stability in gold loan demand and revival of credit demand. The RBI announcement on enhancing UPI by introducing a single-block-and-multiple-debits functionality will further lead to ease of making payments in e-commerce space and ease of making payments for investment in securities. Also, enhanced scope of Bharat Bill Payment System (BBPS) will deepen the access for individuals and businesses leading to faster access of funds and improved efficiency.” -Mr. George Alexander Muthoot, MD, Muthoot Finance

Venkatraman Venkateswaran - Group President & Chief Financial Officer at Federal Bank, said,"Against the backdrop of geopolitical tensions, global uncertainty and slowdown in global growth, India growth story is a stand-out. Inflation continues to be sticky and further calibrated actions are likely by the central bank. Reigning-in inflation and bringing it below the top end of the band and then subsequently further down is RBI’s main focus"

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities said, "The RBI, in line with expectations, hiked repo rate by 35 bps to 6.25%. The stance also remains unchanged at withdrawal of accommodation though the voting against this stance has increased to two members. Overall, the concern on inflation continues especially as core inflation remains sticky and elevated. Growth concerns remain limited, for now. We believe the RBI is now close to the terminal rate with the real policy rate, based on few quarters ahead inflation, around 100 bps positive. The February policy decision will be finely split between a pause and a last 25 bps hike with a bias towards a hike given that near term inflation readings is likely to remain relatively elevated around 5.5%."