Rate pause on expected lines, say bankers

The Monetary Policy Committee (MPC) maintained status quo on policy rate, citing inflationary pressures. The decisionto stay on hold and wait for greater clarity to emerge with incoming data was decidedby a vote of five to one. While keeping the interest rate on hold, the central bank cut its earlier inflation projection for FY18. It also gave a boost to the housing sector by cutting risk-weights on new home loans and reducing the standard asset provisioning. Bankers said the RBI move was on expected lines.

Arundhati Bhattacharya, Chairman, State Bank of India : The large cut in inflation projection by the RBI in the monetary policy is in consonance with ground realities and is likely to create room for rate cuts in the latter half of the year. The decision to reduce the risk-weights for home loans (of) over ₹30 lakh will release capital for the banking industry and is a positive move.

Chanda Kochhar, MD and CEO, ICICI Bank : The RBI’s acknowledgement of downward shift in the inflation trajectory is welcome. It is also heartening that the RBI has again reiterated its focus on resolution of stressed assets which will help strengthen the banking system and ensure that investments made are optimally utilised. The SLR cut and reduction in risk-weights for housing loans are positive moves that will support bank liquidity and encourage growth in housing loans.

Rajeev Rishi, Chairman, Indian Banks’ Association : The transient nature of inflation which is below 4 per cent at present has not provided enough comfort to the RBI to take a call on repo rate in this policy. As a result, it was kept unchanged as widely expected. Reduction in SLR by 50 basis points to 20 per cent could help banks adhere to the liquidity coverage norms of Basel-III. Reduction in the risk-weights on certain categories of housing loans is a positive signal. Modifications in the masala bonds to make it more attractive to investors would help the entities raise resources through these bonds.

Dinabandhu Mohapatra, MD & CEO, Bank of India : The reduction in SLR by 50 bps effective June 24 will facilitate banks to meet the LCR requirement of 100 per cent comfortably by January 1, 2019. However, this measure will not have an impact on credit offtake as banks are already in a situation of excess SLR, in spite of which credit growth is at a sluggish 5.7 per cent. Harmonising the guidelines for rupee-denominated bonds with ECB guidelines in terms of maturity, all-in-cost ceilings, etc., will ensure that this instrument gains more traction. Overall, the policy maintains a dovish stance and is pro-growth in outlook.

Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank : The RBI’s determination to address the stress in banks’ balance sheets, pitch for bringing down the administered interest rates on small savings in sync with market rates and capital for banks will ensure adequate credit flow to the productive sectors.