Industry Welcomes RBI's Monetary Policy

Within a few hours of RBI's April Month's monetary policy meeting, industry experts are coming forward with their feedback and observations on Mr Shaktikanta Das' Monetary Policy. Here is the earlier update on RBI's Monetary policy announcement.

Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet shared his perspective towards the latest monetary policy announcement by RBI and he mentioned, “The Standing Deposit Facility (SDF) at 25 bps below policy rate is transformative. This effectively transfers liquidity management control from the RBI to banks as they can now manage liquidity without collateral. This will also enable faster policy transmission. In effect, there is a 40 bps increase in the interest rate as banks will deposit excess funds with the RBI at a 40 bps higher rate. The overnight money market rates are set to go up by 40 bps with immediate effect.”

Harish Prasad, Head Of Banking, FIS shared his comments on today's Monetary policy announcement by RBI's Shaktikanta Das on the monetary policy.

According to Mr Prasad, "It is quite clear that the Reserve Bank is trying to establish a fine balance on the proposed CBDC keeping various considerations in mind. Primary amongst these is the risk that the CBDC could pose to demand deposits withing the banking system today, i.e. if people preferred to hold CBDCs over holding demand deposits with banks. This could have far-reaching impact to the functioning of the banking system as well as to cost of funds and it is critical that this does not end up becoming an outcome of the proposed CBDC. It has been reiterated that holding money in the form of the proposed CBDC does not entitle the holder to any interest, and this addresses this risk to an extent."

The Deputy Governor's statements also throw light on some of the key drivers behind the Indian CBDC. He also added, "Firstly, the need to reduce levels of physical currency to driver better efficiency and lower costs around national currency management, which has been well-known for long.

Secondly, his comments around Dollarization threats and the rise of various Stablecoins pegged to the Dollar offering a way of instantaneously swapping Crypto holdings into USD funds via an intermediate vehicle such as dollar-pegged Stablecoins gives some good insights into how RBI is thinking. Stablecoins have indeed played a major role in supporting the rise of cryptocurrencies, and this is sought to be curbed via positioning CBDCs as a fully digital transactional currency."

Mr. Kamal Khetan, Chairman and Managing Director, Sunteck Realty Ltd expressed his views on today’s RBI announcement, by quoting, “Today's announcement by the Reserve Bank of India to rationalize the risk weightage on housing loans and link them to loan-to-value (LTV) ratios till March 2023, will boost the nation’s real estate sector. This announcement will encourage banks to continue lending more to individual homebuyers without feeling the stress on their balance sheets. It will effectively result in higher credit flow to the housing sector and eventually make the residential segment a lucrative investment for aspirational homebuyers.”