Mumbai: The RBI has restarted the process of holding consultation with industry bodies and banks ahead of the monetary policy review next month. The consultative process, which was followed for years, was discontinued in recent years after the monetary policy committee (MPC) took over the job of rate-setting. With the objective of getting a wider feedback, the central bank has invited industry and bankers for pre-policy meetings starting with the April 2018 policy. The MPC will meet on April 4 and 5 to decide on rates following which the RBI will announce the decision. It is widely expected that the RBI will keep rates on hold given favourable inflation numbers.
At the meeting with industry representatives on Tuesday, businessmen made a strong pitch for keeping the interest rate on hold as inflation was stabilising and recovery was still incipient.
Among those present was Confederation of Indian Industry (CII) President Shobana Kamineni, who asked the governor to review both — the decision to ban Letters of Undertaking (LoUs) as well as the one to discontinue all the schemes for restructuring of stressed loans.
“There are enough indications that the green shoots of recovery are gathering traction in the economy and a policy action by the RBI — which would refurbish business sentiment, support domestic demand and trigger the turn of the investment cycle is very much required,” said Kamineni.
“With growth tracking in line and inflation tracking slightly below the RBI’s projections, we don’t expect any changes to policy rates and stance at the upcoming meeting. Confidence on the growth outlook (and its impact on inflation) will be key to assess how the MPC’s stance will evolve thereafter,” said Morgan Stanley in a research report.