Views of Mr. Jaikishan J Parmar (Research Analyst, Angel Broking):
"Largely along expected lines, the Monetary Policy Committee (MPC) chose to maintain status quo on repo rates at 6% in its December 06th policy. However, the MPC has maintained its neutral stance on rates. That leaves the reverse repo rate at 5.75% and the bank rate at 6.25%. Among the 6 members of the MPC, only Dr. Ravindra Dholakia voted for a 25 basis points reduction in rates while the other 5 members voted for a status quo. It may be recollected that over the last 3 years between Jan-2015 and Dec-2017, the repo rates have been brought down by a full 200 basis points from 8% to 6%.
The RBI has maintained its GVA guidance at 6.7% although inflation guidance has been raised by 10 bps on the back of weak Kharif output this year. Outside of interest rate guidance, the policy has also hinted that the bank recapitalization package will be released in the next few days and has emphasised that recapitalization bonds may be front loaded in case of strong banks. The MPC also confirmed that the surplus liquidity in the financial system had been largely neutralized by the RBI's open market operations (OMOs). The RBI governor, Dr. Urjit Patel, has also ruled out the possibility of any special dividend to the government out of profits for last fiscal year."