Bankers hail rate cut to boost credit sentiments

Bankers hail the 25 basis point rate cut in the third bi-monthly policy announced by the Reserve Bank of India (RBI) on Tuesday as it boosts market confidence and hope to see improvement in the credit demand with more supportive measures to enhance better credit and borrowing options.

Apart from a reduction in key repo rate by Governor Urjit Patel headed Monetary Policy Committee (MPC), the RBI also plans to set up a task force to address the information asymmetry between borrowers and lenders as well as to make the credit market more efficient.

Arundhati Bhattacharya, Chairman of State Bank of India:

The RBI decision to cut 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 credit cycle with a revival of demand.

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Chanda Kochhar, MD and CEO, ICICI Bank:

The RBI’s action today 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.

A number of regulatory and developmental measures like tri-party repo for corporate bonds and enhanced limits for foreign investors using the futures market have also been announced.

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 of Indian Banks’ Association and Central Bank of India:

The Repo rate cut is on the expected line as inflation trajectory was below the RBI target of 2.0-3.5 percent in the first half of the year. Since banks have already passed on the previous rate cuts to the customers, further action in this front will be examined now with the changes in the signal rate.

Sentiments of the bankers on low credit pick up is also echoed by RBI by highlighting the need for reviving the private investments, affordable housing and removing the impediments in infrastructure.

In all the bi-monthly policies of this year, RBI has highlighted the need for further recapitalization 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.

Dinabandhu Mohapatra, MD & 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% 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. 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 like 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.

Chandra Shekhar Ghosh, Founder, MD & CEO, Bandhan Bank

As most of us expected, the RBI has cut its policy rate by a quarter percentage point and kept its monetary stance neutral. This means, in future, depending on flow of data, it will act.

Among other things, the RBI’s decision to set up a high level task force for creating a transparent, comprehensive and near-real-time public credit registry and comprehensive credit development reports by the credit information companies will help banks in credit assessment and risk pricing and make the credit market more efficient.

Rana Kapoor, MD & CEO, Yes Bank

Resumption of easing cycle with RBI’s calibrated 25 bps rate cut after a hiatus of 9-months is a welcome move. The reduction clearly acknowledges downside to inflation pressures.

India’s inflation has undergone a structural shift, with the emergence of ‘new normal’ at lower levels. This reinforces my view of room for incremental rate cuts to the tune of 50-75 bps in coming months, which will reinforce RBI’s parallel efforts to address the twin balance sheet problem and support growth recovery.

Ravi Kishan Takkar, CEO and MD of UCO Bank

Lending rates are likely to come down with this rate cut as even deposit rates are moving downwards. It will depend on how much room does each bank have. The full transmission has not come through but a larger part of about 65-70 percent of our loans have moved to the MCLR and MCLR has seen transmission. The policy rate cut is a positive for further passing of rates.

Ravindra P. Marathe, MD & CEO, Bank of Maharashtra

It’s a growth driven policy. The apex bank’s stress on the need to reinvigorate private investments, clear infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana, is a clear signal of the same.