Business Today
Loading...

RBI MPC meet to start tomorrow; to announce policy stance on August 6

Amid the demand for one-time loan restructuring by industry leaders, many experts believe the RBI could decide against rate cut this time

twitter-logoBusinessToday.In | August 6, 2020 | Updated 09:28 IST
RBI MPC meet to start tomorrow; to announce policy stance on August 6
The MPC in its last policy meeting in May had decided to cut key repo rate by 40 basis points

The three-day Monetary Policy Committee (MPC) meet, headed by Reserve Bank of India's (RBI) Governor Shaktikanta Das, will commence tomorrow on August 4. The MPC will announce its policy stance decisions on August 6. Amid the demand for one-time loan restructuring by industry leaders, many experts have predicted the RBI could decide against rate cut this time.

SBI's Ecowrap report stated that an August policy rate cut is unlikely as of the total repo rate cut of 115 bps since February, 71 bps -- 85 bps in case of large banks -- has been transmitted to customers. This in itself is the fastest policy rate transmission in India, many believe.

Kuntal Sur, Partner & Leader, Finance Risk & Regulation, PwC India, said the MPC has followed an accommodative policy on rates, with a cumulative repo rate cut of 135 bps over the last one year. "Given the growth priority, we expect a soft stance to continue. However, since there is ample liquidity in the system and transmission of rates is happening, there may be a pause on the reduction of rates," Sur said.

Higher inflation will also be a concern for the central bank. Higher prices of food items especially meat, fish, cereals and pulses pushed the retail inflation based on Consumer Price Index (CPI) to 6.09 per cent in June. This inflation level is beyond the comfort of the RBI, which has been tasked with keeping it at 4 per cent in the medium term with a 2-percentage points leeway on either side.

Former Reserve Bank of India (RBI) Deputy Governor Viral Acharya also said recently that the regulator should focus on inflation overgrowth at its August policy meet. "In my view, what the MPC should take seriously is that you have a legal mandate. You are charged with maintaining a headline target rate of 4 per cent on Consumer Price Index inflation," Acharya said during a chat hosted by Bhavan's SPJIMR.

Many experts, however, also believe the RBI could go for another repo rate cut of at least 25 bps on August 6. The MPC in its last policy meeting in May had decided to cut key repo rate by 40 basis points to 4 per cent from 4.4 per cent earlier.

Also read: RBI MPC meet: Central bank to decide on policies for reviving growth

Also read: RBI suggests capping bank CEO's tenure to 10 years for promoters, 15 years for non-promoters

With inputs from PTI

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close