RBI policy: Here is what bankers have to say

RBI policy response of raising rates by 25 bps is dictated by robust consumption and improving capacity utilization. Cost push inflation is a clear risk going forward. 

Chanda Kochhar, MD and CEO, ICICI Bank 

The hike in the policy rate today reaffirms RBI’s credibility as a vigilant Central Bank especially against the backdrop of heightened global uncertainties. Such timely action will ensure that inflation expectations remain anchored thereby aiding financial stability. The increase in the carve-out from SLR (statutory liquidity ratio) for LCR (liquidity coverage ratio) maintenance is a very important step that addresses the asymmetries in system liquidity and will temper the increase in short term rates.

Measures to facilitate greater transparency and depth in financial markets, such as increasing limits in ‘when-issued’ markets and short sale in government securities as well as moving to market valuations for state government securities are welcome steps. Moreover, convergence in definition of the priority sector limit for housing loans with that of the government’s affordable housing scheme will ensure that this segment receives a fillip.

Zarin Daruwala, CEO, India, Standard Chartered Bank

RBI delivered a balanced monetary policy highlighting strong domestic and global growth while acknowledging rising inflationary pressures. It retained the robust GDP forecast of 7.40 percent for 2018-19 and also hiked the repo rate to counter rising CPI. It is noteworthy that RBI has maintained its neutral stance so as to further support growth. Sustained improvement in capacity utilisation augurs well for investment demand, credit off-take and overall economic sentiment. The two per cent increase in the SLR/LCR overlap will give a boost to Banks’ liquidity for supporting credit growth.”

Rana Kapoor, MD & CEO, Yes Bank

RBI’s unanimously delivered 25bps hike has been balanced with a neutral stance, reinforcing MPC’s alacrity to retain inflation within its 4.0 percent target amidst hitherto buildup in price pressures led by crude prices. The rate action comes at a time when economic recovery now appears to be on a firmer footing.

This stance allows RBI the choice to act in accordance with evolving macro and financial conditions, in both global and domestic economy in the coming months. Amidst many moving parts, this will entail a careful balancing of global headwinds from elevated crude prices, geopolitical tensions, and domestic policies of MSPs, state pay commissions on growth-inflation dynamics.

Melwyn Rego, CEO, Syndicate Bank

The decision of RBI to allow banks to spread the MTM losses on investments for the quarter ending June 30, 2018, equally over a period of four quarters and increase in Liquidity Coverage Ratio ( LCR ) carve-out from SLR, will give some relief to the banks on capital and liquidity front.  Another news for banks to cheer is, filip given to affordable housing, by increasing limits for priority sector lending.