Bankers' reaction: RBI holds key interest rates at monetary policy meet

Explaining the regulatory action, the RBI said The Karad Janata Sahakari Bank does not have adequate capital and earning prospects.

The Reserve Bank of India (RBI) today kept the key policy repo rate unchanged at 6.25 percent. The six-member monetary policy committee (MPC) under RBI Governor Urjit Patel maintained that the decision is consistent with a neutral stance of monetary policy in consonance with the “objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 percent within a band of +/- 2 percent, while supporting growth”.

The central bank also cut the headline inflation projection in the range of 2.0-3.5 percent in the first half of the year and 3.5-4.5 percent in the second half.

Bankers’ response to the policy is as below:

Arundhati Bhattacharya, Chairman, SBI

“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 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 to 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 and Chairman of Central Bank of India

The transient nature of the inflation which is below 4.0 percent at present has not provided enough comfort to RBI to take a call on repo rate in this policy…Reduction in the risk weights on certain categories of the housing loans is indeed a positive signal. Since retail loans are only showing signs of growth and housing loan segment which is the major sector of retail, reduction in LTV ratio, risk weights and standard assets provisioning would spur up growth in this segment.

Dinabandhu Mohapatra, MD and CEO, Bank of India

The stance of the policy is more dovish this time. The reduction in SLR by 50 bps effective June 24 will facilitate banks to meet the LCR requirement of 100 percent 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 percent. The reduction in risk weights and standard asset provisioning on certain categories of housing loans will lower housing loan rates and increase housing loan portfolio of banks. Considering the need for greater fund infusion in critical segments such as infrastructure, this is a welcome development.

Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank

"On the expected line, the Reserve Bank of India (RBI) has kept both the policy rate as well as its monetary stance unchanged but the tone of the policy has turned dovish. The Reserve Bank’s determination to address the stress in banks’ balance sheets, pitch for bringing down the administered interest rates on small savings in sync with the market rates and capital for banks will ensure adequate credit flow to the productive sectors."