December 7, 2016 / 9:25 AM / 8 months ago

Expert Views: RBI unexpectedly keeps policy rate unchanged

4 Min Read

People walk past the Reserve Bank of India (RBI) head office in Mumbai, India, November 9, 2016.Danish Siddiqui

MUMBAI (Reuters) - The Reserve Bank of India (RBI) unexpectedly kept its policy repo rate unchanged at 6.25 percent on Wednesday, despite calls for action as an intense cash shortage threatens to slam the brakes on the world's fastest growing major economy.

Here are some initial reactions to the decision.


Samrat Dasgupta, Ceo, Esquire Capital Investment, Mumbai

"The policy rate decision is very surprising. We expected at least a 25 basis point cut in the repo rate so that the economy gets stimulated a little bit. But it doesn't look like that is happening. There is already a slow down in the economy because of demonetization. So we expected some action to be taken."

"We certainly expect the RBI to cut rates in the next policy meet. It will become a big problem otherwise."

"Inflation will remain low. This was an opportunity for the governor to cut rates; so I think it is a missed opportunity."

Sandip Sabharwal, Domestic Private Fund Manager, Mumbai:

"Market rates are down so policy not very relevant."

"Withdrawal of Incremental CRR from 10th Dec is a positive. RBIs assessment of inflation outlook is likely to be wrong given demands destruction post demonetization."

"Urjit Patel seems to have tried to prove that he has not sold his soul to the government."


"The way RBI has been operating over the last three weeks has been a bit bewildering. For example, when demonetization happened, the RBI should have announced the CRR measures on that day itself instead of announcing it ten days later."

"The RBI seems to be a little inconsistent in the different things it are trying to say."

"It is difficult to say at this point whether there will be a rate cut in the next policy meet because that will again be a function of how demonetization has played out. I think the RBI would prefer to see what the Fed does, and if the Fed is not very hawkish, they will probably cut (rates) at the next meet."

Chakri Lokapriya, Cio; Tcg Group Holdings Llp, Mumbai

"We read that RBI thinks there is a demand crunch and lack of cash will lead to supply constraints which will raise inflation. RBI is seeing growth at 7.1 percent vs. 7.6 percent and higher inflation due to supply constraints."

"RBI should have cut rates to bring back growth rather than focus on supply side risks which are more sticky. Focusing on items such as rise in crude prices as risks over which RBI has no control is not an appropriate stance."


"I think RBI will cut the rates in the next policy meet quite aggressively, by 50 basis points."

"They left the rates untouched because they had to focus on financial stability and rupee stability. Whatever transmission had to happen has already happened."

Tirthankar Patnaik, India Strategist, Mizuho Bank, Mumbai

"We are certainly disappointed with the lack of clarity from the policy commentary on the impacts of demonetization."

"The central bank's decision to keep rates unchanged opens up room for a rate cut in February. While we do not see any upside risks for the next two quarters, we do believe that the monetary policy stance will be more dovish going ahead."


"It was not a surprise to us. The situation is pretty uncertain both global and domestic. Commodity prices are inching up. Monetary policy should not viewed from the point of view month-to-month inflation. Policy should always be about what the future looks like."

Kuntal Sur, Partner, Risk & Regulatory, Pwc India, Mumbai

"Global factors like stronger a US dollar, possibilities of a further rate hike by the Fed in Dec & hardening of oil prices internationally may have forced RBI to keep repo rate unchanged at 6.25 percent. The market liquidity will be maintained as RBI announced withdrawal of incremental CRR from Dec 10."

Reporting by Mumbai and Bengaluru Newsrooms; Editing by Euan Rocha

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