Mr Ajai Kumar, Chairman and Managing Director of Corporation Bank, has said that the RBI’s second quarter review of monetary policy for 2011-12 will be beneficial in the long term.

Speaking to Business Line over phone from Mumbai, he said that certainly growth has been restrained. The RBI has admitted this also. On the positive side, inflation is already showing signs of weakening. “As the RBI Governor said, from December onwards we would be looking towards a downward trend. So I think if that happens and the measures to tackle inflation continue, the future increases may not be there,” he said, adding that in the long term the policy will be beneficial.

SB account deregulation

On the deregulation of SB accounts, he said that it is a positive move to de-regulate and have a healthy competition. Each bank has to work on what is its portfolio and what is the impact, and what is the challenge ahead. It will have an impact on the cost of deposits and the cost of credit as well, he said.

Asked if the repo rate hike will lead to increase in interest rates on loans, he said the repo rate hike will certainly have an impact. To a query on his bank’s move on this, Mr Ajai Kumar said: “We will have internal dialogues through committee, and I think in a week or so Corporation Bank will be taking a decision on this.”

On the RBI’s decision to permit domestic scheduled commercial banks (other than RRBs) to open branches in tier 2 centres (with population 50,000 to 99,999 as per Census 2001) without the need to take permission from the Reserve Bank in each case, subject to reporting, Mr Ajai Kumar said that it is good for banks to expand faster in areas that are not fully banked.

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