The RBI kept its key policy rates unchanged in its monetary policy review today and maintained an accommodative stance for the current and the upcoming year in order to ensure durable economic growth.

Commenting on the same, industry experts said that this was widely expected in view of the rising inflation.

“Rising inflation means that the Reserve Bank of India had to maintain the key lending rate at 4.00% — unchanged since May 2020. This would mean that deposit and loan interest rates would largely remain flat though banks and lending institutions will continue to calibrate the rates on fresh loans and deposits as per their policies. Lending rates are going through historic lows with around 10 major lenders offering home loans at under 7.00%,” said Adhil Shetty, CEO, BankBazaar.com.

In light of recent difficulties faced by cooperative banks and NBFCs, the RBI announced the issuance of guidelines aimed at improving governance and the quality of financial reporting. In minor announcements, the RBI also said that RTGS would soon be made available 24×7, continuing from similar measures that had been applied to IMPS and NEFT. To further widen the use of digital payments, the cap on contactless card transactions, e-mandates on recurring card payments and UPI is being raised from Rs 2000 to Rs 5000.

From a lending perspective, non-food credit growth accelerated and moved into positive territory for the first time in November 2020 on a financial year basis, implying that banks and NBFCs are beginning to lend more. “In contrast, for most of this financial year, lending took a back seat as a significant portion of the large inflow of deposits into the banking system was being deployed to boost SLR investment — holdings that bank must compulsorily maintain in government-backed securities, gold and cash. To give a further boost to lending, the RBI has decided that scheduled commercial banks and cooperative banks shall not make any dividend pay-out from the profits pertaining to FY 21 to help banks conserve capital and strengthen their balance sheets with a view to increase lending,” added Shetty.

Naveen Kukreja, CEO & Co-founder, Paisabazaar.com, said, “The MPC’s decision to continue with the accommodative stance, despite the current inflationary pressures, clearly demonstrates the RBI’s prioritisation of economic growth over inflation. These decisions should hopefully further help support economic revival and credit demand. The decision to enhance the upper limit on contactless card payments from Rs 2,000 to Rs 5,000 is progressive and will increase customer convenience, especially in these pandemic times when social distancing and staying contactless is crucial. This should also further boost digital payments, which would help the overall financial ecosystem.”