Bankers’ views on RBI policy

Zarin Daruwala, Cluster CEO, India and South Asia, Standard Chartered Bank

MPC held the repo rate at 6.5% citing robust local economic growth while also acknowledging weakness in global demand. The strong forex reserve position has lent stability to interest rates in the economy. In a surprise move, aimed at temporarily soaking up the surplus system liquidity, banks will have to set aside 10% extra liquidity towards CRR on incremental liabilities raised between May and July. With approx. ₹ one lakh crore system liquidity likely to be withdrawn, short term rates are likely to be pressured in a run up to the festive season. The banking system liquidity build-up is largely attributed to strong forex inflows and the withdrawal of ₹2,000 notes. 

• Also Read: RBI Monetary Policy Highlights: MPC keeps repo rate unchanged at 6.5%; inflation for FY24 pegged at 5.4%

Suresh Khatanhar, Deputy Managing Director, IDBI Bank

RBI’s decision to keep the repo rate unchanged at 6.50 per cent is in line with the inflationary trends that have been visible so far as well as those expected going forward. RBI’s commitment to firmly focus on aligning inflation to the target of 4 per cent signals a benign interest rate scenario going forward. The decision to increase incremental CRR is only intended to absorb the surplus liquidity generated by various factors and is a temporary measure for managing the liquidity overhang and is not likely to impact liquidity in the system. Overall, by keeping interest rates intact for the third straight time, the RBI has signalled that the economy benefits and continues to grow.

Murali Ramakrishnan, MD and CEO, South Indian Bank

MPC’s measures over the last few quarters have been effective in maintaining a tight leash on headline inflation while facilitating economic growth. Indian economy has responded by staying resilient in the face of heightened geo-political uncertainties and a volatile international demand-supply equation. The unchanged repo rate will ensure that inflation progressively aligns with the target, while supporting growth.

• Also Read: RBI Monetary Policy Committee announcements: Here’s everything you need to know

Ashu Khullar, CEO, Citi India

RBI’s status quo policy with a balanced rhetoric around it, is likely to ease any market fears of a knee-jerk monetary policy reaction to the vegetable price led spike in near-term inflation. At the same time, RBI’s views on resilience of the domestic growth outlook in a challenging global environment, is comforting. We would expect the stability in the policy rates to continue for a longish period, which would support both the growth and inflation objectives.

Dinesh Khara, Chairman, State Bank of India

The RBI policy communication is nuanced, and has rightly exercised caution and warranted vigil on the inflation trajectory given the current jump in vegetable prices. With capacity utilisation currently running higher than the long-term trend, the central bank does have the bandwidth to look through the current increase in food prices. On the developmental front, the widening of options in payment systems, the creation of a digital public tech platform, and putting in place a transparent framework for EBLR are enabling provisions for the creation of an efficient and effective market microstructure.

• Also Read: Editorial. MPC is right in deciding to look through recent spikes in food prices

Shanti Ekambaram, Whole-Time Director, Kotak Mahindra Bank

All high frequency data indicates resiliency in economic growth across segments resulting in MPC retaining the estimated growth of 6.5%. The central bank reiterated its inflation target of 4 per cent and stayed committed to providing adequate liquidity to support growth. For now, expect pause for some time unless data shows a different trend. Also global factors – rising crude and Fed’s stance could have a bearing on future rate action.

A K Goel, Chairman, Indian Banks’ Association and MD & CEO, Punjab National Bank

Even after the temporary imposition of incremental CRR to absorb surplus liquidity, there will be sufficient liquidity in the system to meet the needs of the economy. It is pertinent to note that excess liquidity beyond a level could put pressure on inflation. It is heartening to note that growth impulses of the economy continue to remain robust and RBI has kept the projection of GDP for FY 24 unchanged at 6.5 per cent.