Reserve Bank of India (RBI) may change its monetary policy stance and increase lending rates from the first quarter of 2022, Japanese brokerage firm Nomura said on Monday.
The apex bank will begin moving towards normal liquidity flow from this month, it said, adding that this will narrow down the gap between the rate at which it funds the system and the rate at which it absorbs excess cash flow, in December.
A section of experts have seen RBI’s move to narrow down excess liquidity through stated targets as a first step towards normalising its policy stance, which has been quite accommodative since last year, to soak in the pressures created due to the onset of the Coronavirus pandemic, the report by the brokerage firm noted.
Nomura hiked its consumer price index inflation target for 2022 to 5.2 per cent from 5 per cent earlier.
Demand remains strong in India, but there are supply-side headwinds in areas like chips which is bothering the auto sector and coal shortages which threatens to put parts of the country into darkness, it said.
There has been an acute shortage of coal in the country and the power companies are facing the prospects of importing coal at high costs and with power demand expected to rise in the coming days due to the festival season, supply side constraints could lead to downside risk to growth momentum, Nomura warned in its report.