New Delhi, April 06, 2023.

The Reserve Bank of India on Thursday hit the pause button and decided to keep key benchmark policy rate at 6.5 per cent even as inflation is trending above its tolerance level.

The rate hike has been paused after six consecutive rate increases aggregating to 250 basis points since May 2022.

Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee will not hesitate to take action in the future. While keeping the interest rate intact, Das said core inflation remains sticky. Core inflation generally refers to inflation in manufactured goods.

Ms. Shanti Ekambaram, Whole-time Director, Kotak Mahindra Bank

“The “Pause” on the repo rate has surprised the market players and it is much welcome given the intense volatility in the global financial markets and the positive real interest rates in India. The Governor has clearly emphasized that the pause is to assess the impact of the cumulative 250 bps rate hikes so far but remains committed to inflation targeting and bringing it within the tolerance range. The economic growth estimate at 6.5% for FY’24 is marginally higher than the previous estimates. The RBI is likely to watch the evolving global growth risks, the upcoming monsoon season, and the inflation data before deciding on further action – whether to extend the pause or to act. Overall, we expect rates to remain stable which would augur well for the economy.”

Mr. Manish Kothari, President & Head – Commercial Banking, Kotak Mahindra Bank Limited

“Very balanced and prudent approach taken by RBI in deciding to pause, keeping in mind both inflation control (price stability) & supporting GDP growth (financial stability). At the same time, reiterating & reinforcing the fact that sticky inflation & international markets will continue to be closely watched by them for future decisions – hence, keeping their options open. I believe, easing global situation, including some cool-off in inflation, leading to possibility of slower Fed hikes + domestically, a reasonably comfortable CAD & Forex Reserves position + overall consumption demand still in the positive territory – led the MPC to take this decision! Two key things to watch out for – unfolding of the monsoon (El Nino effect) and financial stability of the global markets. As things stand, I am hopeful that this rate hike pause will help in creating a positive mindset (in general), which can lead to some growth in both, investment & consumption demand. Also, this being an election year + a strong capex expenditure budgetary plan announced by the Govt. should aid this.”

Mr. Virat Diwanji, Group President & Head- Consumer Bank, Kotak Mahindra Bank

“With a lesser expected “pause” in the policy rate hikes, the RBI has given priority to financial stability and economic growth while firmly underlining that it is ready to act if its reading changes at any time. Further, through a soothing commentary, the central bank seems to have sent positive signals to almost all sections of the economy. Though headwinds like higher crude prices, a sketchy monsoon, and further deterioration in the global financial system are being anticipated, for the moment, India’s key economic growth indicators seem to be positive and manageable. While we expect another hike to be delayed at least for another 2-3 quarters, the RBI will be guided by the cumulative effect of all precious hikes.”