Rate cut has come at the most opportune time: bankers

As was widely expected, the Monetary Policy Committee cut the repo rate by 25 basis points from 6.25 per cent to 6 per cent. The monetary policy stance was, however, maintained at neutral due to expectation that the inflation trajectory would rise from the current lows. Top bankers said given that the inflation was low, this was the most opportune time to cut the rate.

Arundhati Bhattacharya, Chairman, State Bank of India: The RBI decision to cut the repo rate was a welcome move and will perk up market sentiments. The policy commentary was nuanced and balanced indicating upside risks to inflation have waned, whereas growth impulses in industry and services are weakening. We are hopeful that this measure should enable a gradual recovery in the credit cycle with a revival of demand.

Chanda Kochhar, MD and CEO, ICICI Bank: The RBI’s action to lower the policy rate is a welcome step, which had been widely anticipated given the significant decline in inflation observed recently. The prudent approach of the central bank in reacting to incoming data in a calibrated manner will reinforce the confidence amongst global investors. The formation of a high-level committee to address the information asymmetry in the credit markets will help in enhancing transparency and information availability.

Rajeev Rishi, Chairman, Indian Banks’ Association : The repo rate cut was on expected lines as the inflation trajectory was below the RBI target of 2-3.5 per cent in the first half of the year. . Sentiments of the bankers on low pick-up in credit have been echoed by the RBI by highlighting the need for reviving private investments, affordable housing and removing the impediments in infrastructure. The RBI has highlighted the need for further recapitalisation of State-owned banks simultaneous with early resolution of large stressed assets to equip them to step up lending activities in future. This is a big positive for the banks.

DB MohapatraMD & CEO, Bank of India: Considering the present scenario, the time was most opportune for a rate cut. GVA growth for FY18 has been kept unchanged at 7.3 per cent which will be supported by this rate cut. Inclusion of excess reserves with foreign central banks as part of LCR will help banks having excess reserves with foreign central banks. The proposal to introduce tri-party repo is expected to facilitate the development of a vibrant and deep corporate bond market and will supplement other recent developments in this arena, such as the introduction of municipal bonds. Overall, the policy stance is neutral and the rate cut is expected to provide further boost to consumption which, in turn, will have a positive multiplier effect on the overall economy.

Rana Kapoor, MD &CEO, YES Bank: Resumption of easing cycle with RBI’s calibrated 25 bps rate cut is a welcome move. The reduction clearly acknowledges the downside to inflation pressures. India’s inflation has undergone a structural shift, with the emergence of a ‘new normal’ at lower levels. This reinforces my view of room for incremental rate cuts to the tune of 50-75 bps in the coming months, which will reinforce RBI’s parallel efforts to address the twin balance sheet problem and support growth recovery.

Mahabaleshwara MS, MD & CEO, Karnataka Bank : The basic requirement for economic growth is credit growth. Measures like GST implementation and other reforms are long-term benefit-oriented reforms. I think, the repo rate cut is a right step at the right time by the regulator. Now, it (repo rate cut) may provide a clue that credit growth is likely to pick up through a reduction in interest rates.

G Sreeram, MD and CEO, Dhanlaxmi Bank : Banks will be on track in reducing the interest rates, going forward. The actual reduction of rates is a function of many factors, which vary from bank to bank. The rate cut may lead to more competition among lenders and options to customers regarding rate of interest.