Incipient signs of recovery

COMMENTS: Nilesh Shah,Deputy Managing Director, ICICI Prudential AMC

The monetary policy underlines the incipient signs of recovery of the global economy and improving prospects for the domestic economy. RBI has moved its stance from balancing between growth and inflation to now focussing more on inflation basis, their comfortable outlook on growth momentum. While a status quo has been maintained on rates, there are many references in the policy that suggest possible rate hike if inflation moves out of the comfort zone.

RBI has strategically restored SLR rates to 25 per cent so that additional demand for government borrowing programme can be stimulated to keep yields under check.

RBI in this monetary policy has also taken multiple measures for rationalising and streamlining the financial ecosystem. Securatisation measures, where minimum 1-year of holding period is required and minimum 10 per cent of assets should remain in the balance sheet, thereby putting a check on any US sub-prime such as eventuality and regulation of non convertible debentures with maturity of less than 1 year are steps towards regulatory efficacy. Steps proposing introduction of STRIPS this year, launching of floating rate government securities are all positives steps from the market development point of view.

The withdrawing of refinancing and special liquidity facility for mutual funds and NBFS given the current scenario of comfortable liquidity, and the fundamental strength of both industries also is a step in the right direction. On the real estate side, risk weightage increase from 0.4 per cent to 1 per cent is also good for maintaining stability in the system.