The Reserve Bank’s rate-setting panel started its three-day deliberations on Tuesday to establish the next monetary policy in light of Budget 2022-23, inflationary concerns, and a shifting geopolitical landscape.
The policy resolution is anticipated to be released on Thursday by the six-member Monetary Policy Committee (MPC), which is chaired by Reserve Bank Governor Shaktikanta Das.
The benchmark interest rate, also known as the repo rate, is widely expected to remain unchanged by the MPC.
If the RBI maintains its policy rate on Thursday, it will be the ninth time the rate has remained steady in a row. On May 22, 2020, the policy rate was last modified in an off-policy cycle to promote demand by lowering interest rates to an all-time low.
The RBI is expected to maintain current policy rates at its upcoming policy meeting, according to Brickwork Ratings.
It said that the prognosis for inflation and growth for the current fiscal year may remain unchanged, but forward guidance on inflation and GDP for the following fiscal year is anxiously awaited in the announcement.
Despite concerns about the development of the new coronavirus strain Omicron, the most recent MPC meeting, held in December 2021, kept the benchmark interest rate at 4% and elected to maintain its accommodative posture.
The government has entrusted the MPC with the task of maintaining inflation between 2% and 6%.
According to an SBI assessment, the reverse repo rate should be raised by 20 basis points beyond the MPC’s jurisdiction to enable the central bank to find buyers for the flow of new debt issues.
The significant increase in credit growth during the first half of the year, as well as the steeper fall in deposits and the resultant rise in term money rates, as well as the record high borrowings, are all mentioned in the report.
According to the report, the Centre’s gross borrowing will reach a new high of Rs 14.3 lakh crore in 2023 and Rs 10.5 lakh crore in FY22, down from Rs 13.5 lakh crore this fiscal year, while the gross borrowing will be Rs 23.3 lakh crore and the net borrowing will be Rs 17.8 lakh crore when the states are factored in. The budget also plans to return Rs 3.1 lakh crore next fiscal year, up from Rs 2.7 lakh crore this fiscal year, according to reports.
While signs of credit recovery appeared in the first half of FY22, the most recent data for the week ending January 14, 2022, shows all banks incremental credit increased by Rs 5.46 lakh crore, more than double the Rs 2.72 lakh crore seen in the same period last fiscal, while incremental deposit growth was only Rs 8.6 lakh crore, down from Rs 10.5 lakh crore.
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