The RBI October policy was on expected lines as the MPC maintained a status quo on key policy rates and the accommodative stance. On liquidity management, the RBI announced the suspension of GSAP and increased the quantum of variable rate reverse repo (VRRR) auction to address the issue of excessive surplus liquidity. The RBI Governor emphasized that the VRRR auctions are primarily a tool for rebalancing liquidity and should not be interpreted as a reversal of the accommodative policy stance. The central bank kept its FY22 economic growth unchanged at 9.5% YoY while revised CPI inflation forecast downward from 5.7% YoY to 5.3% YoY. We continue to expect the RBI to raise the reverse repo rate in the Dec’ 21/Feb ’22 meeting, while the repo rate hike is likely to be in H1-FY23.
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