The Reserve Bank of India (RBI) may change its monetary policy stance and increase lending rates from the quarter from 2022, Japanese brokerage Nomura said on Monday.
It said the Supreme Bank would start moving towards normal cash flow from this month, which would reduce the gap between the rate at which the system finances and the rate at which excess liquidity is absorbed.
A section of experts found that the Reserve Bank’s overdraft was the first step in normalizing its policy stance by narrowing it down to specific targets, which had been very convenient since last year, to soak in the pressures caused by the onset of the corona virus outbreak, the brokerage firm said in a statement.
Nomura has raised its consumer price index inflation target to 5.2 percent from 5 percent by 2022.
Demand in India is strong, but supply side reversal winds are blowing in areas such as chips and coal shortages that plague the auto sector, threatening to plunge some parts of the country into darkness.
There is a severe shortage of coal in the country and power companies are facing opportunities to import coal at high cost and electricity demand is expected to increase in the coming days due to the festive season, with growth side pace leading to a negative risk of growth, Nomura warned in its report.