Karur Vysya Bank Treasury Head Reddy on RBI Policy
This story was originally published at 12:25 IST on 7 October 2026
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MUMBAI/NEW DELHI - V.R.C. Reddy, treasury head, Karur Vysya Bank, said the following on the Reserve Bank of India's fourth bi-monthly monetary policy statement for 2026-27 (Apr-Mar) detailed Wednesday:
RBI has delivered a decisively hawkish policy, a 25-basis-point repo hike and a surprise shift to "calibrated tightening" clearly signal that rate cuts are off the table and further hikes remain firmly in play. The Governor's emphasis on elevated crude prices and heightened global volatility reinforces a cautious but firm stance.
The macro projections add weight to the message. GDP growth has been raised to 7.10%, providing the RBI with policy room, while FY27 CPI at 5.20% suggests that the inflation battle is far from over. Resilient growth, sticky inflation and a tightening stance create a clear bias towards further rate hikes. We see the terminal rate moving towards 6% by March 2027, with scope for one additional hike if global risks intensify.
On liquidity, the absence of a CRR hike and OMO sale suggests that the RBI is comfortable continuing with VRRRs, buy sell swaps and ongoing sterilisation.
For bonds, global yields and crude are now the key signposts. If both peak, the 7.24-7.25% zone in the 10-year G-sec looks attractive, a renewed global shock could push yields towards the 7.35-7.40% peak corridor before value emerges.
A clearly hawkish policy that raises terminal rate expectations on the back of resilient growth and higher inflation. Liquidity conditions, global yields and crude will determine how far the tightening cycle travels.
End
Compiled by Meera Nair
Filed by Himanshi Gupta
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