KOLKATA : The Reserve Bank of India (RBI) is expected to continue its current accommodative stance to maintain sufficient liquidity in the system and monetary policy tightening is in several quarters as the economic recovery has not reached the pre-Covid level, the former of the umbrella bank said Vice Governor R Gandhi.
He said the low interest rate regime will continue to support economic activities.
“In my assessment, the normalization or tightening of monetary policy in India is several quarters away. Certainly not in the current budget. The economy is picking up but we have not reached the absolute pre-Covid level of 2019. -2020, “Gandhi said at an event. organized on Friday by the Bengal Chamber of Commerce and Industry.
“The RBI will do the trick (the tightening of monetary policy) when the economy experiences sustainable growth,” he said.
On August 6, the central bank had kept interest rates unchanged at an all time high, choosing to support economic recovery rather than inflation. The six-member Monetary Policy Committee (MPC) voted to keep the main buyback rate at 4%, but was divided over keeping the lowest position for longer.
The RBI last revised its key rate on May 22, 2020, in a non-political cycle to revive demand by lowering the interest rate to an all-time low. This was the seventh meeting in a row where he maintained the status quo.
But traders and analysts are seeing signs that India’s central bank is looking to drain record liquidity from the banking system as it increasingly shifts its forex intervention to the futures market.
Earlier this month, the governor of the umbrella bank Shaktikanta Das said: âAs markets move into regular hours and operations and liquidity operations normalize, the RBI will also carry out adjustment operations. end from time to time, as needed, to handle unforeseen and ad hoc operations. cash flow so that the liquidity conditions in the system evolve in a balanced and evenly distributed manner. The next MPC meeting is scheduled for October 6-8.
Gandhi acknowledged that the NBFCs will gradually gain a larger share of the banking market with more technological interventions. He also said that the low interest rate regime will continue even though ordinary people suffer due to falling deposit rates from banks.
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