RBI Policy: Bankers eye data for another off-cycle surprise

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26 Aug, 2025 12:21

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In its sixth bi-monthly Monetary Policy review, the Reserve Bank of India kept policy rates unchanged after going ahead with a 25-bps cut just three weeks ago, suggesting government’s annual budget at the end of this month may hold the key to future action. However it announced a cut in SLR by 50 bps from 22 percent to 21.5 percent of their NDTL with effect from February 7, 2015.

In an interview to CNBC-TV18, various experts shared their thought on the move.

Arundhati Bhattacharya, Chairman, SBI

The policy is neutral but on expected lines. I don’t think the market was     thinking that there would be another rate cut so soon. Whether we cut our rates, I think the governor has very clearly said that it takes time for these things to work itself into the entire industry.

Also, if you have read the Urjit Patel committee, there also they have said that there is asymmetrical transmission whenever there is adequate liquidity. I think that is what is happening at this point of time. There is lot of liquidity, credit demand is very low so unless we see the credit demand picking up, it is going to take a little time. Also, you have to give the credit to the bankers that when the rates were going up as they did for instance by 300 bps in July of 2013, the bankers didn’t raise rates to that extent. So if there is a no clear immediate transmission of the monetary policy changes, we have to be a little patient but the signaling of the easing cycle is very much there and we obviously will be part of that cycle going forward.

Shilpa Kumar, SGM & Head- Global Markets Group, ICICI Bank

 We have to put the policy in the context of what is happening overall. If you  look at the last one year the way India has moved on significant macro  economic factors has actually kind of put it at the top of emerging markets  pile.

 Against that backdrop you also need to put what governor had said last time that once he starts cutting rates he will follow it up with significant cuts as and when he sees opportunity. Therefore the third thing that we are actually looking at the pretty big event coming up which is a time to kind of do a long-term structural fix for the fiscal of the country. So given all of this a rate cut expectation do stand. We would still expect another quarter percent going into the end of this quarter. Therefore for the year you will find bond prices supported and heading in the direction of 7.50.

Taimur Baig, Deutsche Bank AG

 It is clear that off-cycle moves are very much on the table whether it is India  or any other central bank. We need to see very good evidence on    disinflation, which we will get for the January data, and a strong Budget. The  Centre has been airing out ideas of a fiscal stimulus, slight worsening of the  fiscal steps for the time being to get investment going, I am not sure  whether the governor would be impressed by such moves but assuming that it is a decent Budget, assuming it is a decent inflation number and let us put aside the GDP revision, there should be yet another off-cycle move perhaps in early March.

When governor Rajan was answering question about real interest rate and said he prefers 2 percent, he again referred to Dr Rangarajan’s report saying 3 percent could be preferable, that suggest a fairly tough stance going forward. There is no way for repo rate to come down below 7. So I think that looking at another 75 bps of rate cut in the cycle is good enough.

Sonal Varma, ED & India Economist, Nomura Fin Advisory & Sec

 No action was well expected given we did not get any incremental news in  the last 15 days but a bit surprised by no change to the January 2016 CPI  target because clearly the underlying inflation trend is already closer to 5  percent. So, if the RBI is sticking to that projection then perhaps it is waiting  for more clarity once the new CPI index comes on February 12 to take a  final call.

The April meeting will be quite important. We will have more numbers on gross domestic product (GDP) side, we will have the Budget, we will know how the change in the CPI base effects the underlying inflationary cycle and we should also have more importantly clarity on the new monetary policy framework; the monetary policy committee moving to the 4 percent inflation target. So, all those things will become more important. Our call at this stage is for a cut at the April policy post which we are expecting the RBI to stay on hold.

B Sriram, Managing Director of State Bank of India

 Policy transmission will happen. The only thing is that unlike the  transmission into the markets, it takes sometime. For example, we have a  liability book of almost Rs 14 lakh crore and for any impact to happen on  that on the basis of transmission it takes some time.

 Even before January 15 rate cut there has been transmission by way of spreads over base rate to various sectors. I am sure this will be a matter of time when we start to again look at it as a bank as a whole and sit and discuss with asset-liability committee (ALCO) and try and see as to what is the best way forward.

VS Parthasarathy, Group CFO, M&M

 I would actually have preferred a rate cut at this announcement as the RBI  and government for sometime have been focusing on health drivers. On  January 15, they shifted the focus to growth drivers and I thought the  trajectory would have been nice if there was a cut straightaway given the  fact that inflation has been quite dovish and so has been the control on  fiscal deficit and the current account deficit, so everything being on the positive side, there was a possibility and scope for a further cut.

There are some positives, like the one on foreign portfolio investment (FPIs) in corporate bonds with a three-year period as a minimum but having the flexibility to sell it, which will in one hand avoid short-term volatility and will also encourage more corporate bonds.