Even as the RBI policy held no surprises, bankers feel the central bank has more room to cut rates with the outlook of a slowing inflation trajectory and economy seen to be picking up.

Arun Kaul, Chairman, Indian Bankers’ Association (in charge), said: The policy announcement was on expected lines. A repo rate cut at this time was not expected as economic activity has not gained much momentum. Following the previous rate cuts, banks have already transmitted the benefits by about 30 basis points. Three key risks highlighted by the RBI in the previous monthly policy statement were poor monsoon, volatility in external environment and rising crude oil prices. However, in this policy, all these risks are kept at a notch down as things are moving towards a positive direction.

Arundhati Bhattacharya, Chairperson, State Bank of India, said: The RBI decision was as per market expectations. The good thing is, however, the RBI’s forward guidance clearly spells out the possibility of more monetary accommodation. In our view, though such action will be data dependent, there seems to be a bias towards further rate cuts. The lowering of inflation projection by the RBI in the last quarter is an acknowledgement of a benign inflation trajectory.

With international commodity prices continuing to decline, it will provide a further cushion on the external front. This will mitigate any adverse external shocks from a Fed rate hike. The decision to hold repo rate was according to market consensus. Chanda Kochhar, MD and CEO, ICICI Bank, said: The Reserve Bank of India has noted encouraging trends in growth, indicative of a strengthening recovery. At the same time, it has opted to monitor inflation trends for some more time before taking any further steps to ease monetary policy. I expect to see easing of rates over a period of time as further transmission of accommodative monetary policy takes place. Inflation is within the targeted range and should this trend sustain, we could see further policy rate action as well. Overall, there is stability in the economy with a gradual improvement in growth.

Rana Kapoor, MD and CEO, YES Bank and President of Assocham, said: While the RBI has refrained from cutting rates today, the policy undertone has leaned on the neutral-to-dovish side. Oil prices and monsoon have evolved favourably over the last one to two months with disinflationary forces being reinforced by the government’s astute management of the food economy and improving quality of spending. This, in my opinion, should create room for at least 50-75 bps of incremental monetary easing hereon up to March 31, 2016. For now, we can perhaps draw comfort from easy money market liquidity that should further enhance monetary transmission and enable steady growth.

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