MPC may keep interest rates unchanged: Federal Bank MD & CEO Shyam Srinivasan

Shyam Srinivasan

The Reserve Bank of India (RBI) is likely to maintain the status quo on the repo rate for the fourth time in a row at its bi-monthly monetary policy review meeting early next month, said Shyam Srinivasan, MD and CEO, Federal Bank, in an interview with Moneycontrol on the sidelines of an event organised by Sanjeevni, United Against Cancer, in New Delhi.

"I think signals indicate we may not see a rate change in this policy meeting, I think there will be status quo," said Srinivasan on September 27.

The RBI raised the benchmark repo rate to 6.5 percent on February 8, 2023, and since then it has kept the rates unchanged in view of the stubbornly high retail inflation and global factors like elevated crude oil prices.

The six-member MPC (Monetary Policy Committee) headed by the RBI Governor is scheduled to meet on October 4-6, 2023. The last meeting of the MPC, the highest rating-setting panel, was in August 2023.

The RBI has projected CPI (consumer price index) inflation at 5.4 percent for 2023-24, with Q1 4.6 per cent,Q2 at 6.2 percent, Q3 at 5.7 percent, and Q4 at 5.2 percent, with risks evenly balanced. CPI inflation for Q1, 2024-25, is projected at 5.2 percent.

"It is unlikely that we will see rate hikes in the next few months. If there is visibility that vegetable prices are cooling off, then inflation may drop as we do not see further pressure on other items in the food basket," said Srinivasan.

"I think they (rates) will be on pause throughout FY23-24. They (MPC) will consider a rate cut only in the April or June policy meeting, not before that," said Sakshi Gupta, Principal Economist at HDFC Bank.

For the whole of the current fiscal year, Gupta estimates average inflation at 5.6 percent against RBI's projection of 5.4 percent.

Gupta added that thanks to supply-side measures announced by the government and a normal monsoon in August and September, RBI may not hike rates again.

"We expect the RBI to maintain status quo this time as inflation is still high and liquidity tight. In fact, going by the RBI forecast on inflation, it would be above 5 percent in Q3 too, which will ensure that the status quo prevails for the calendar year for sure, and probably Q4 too," said Madan Sabnavis, Chief Economist, Bank of Baroda.

Sabnavis further said that there are uncertainties relating to the kharif crop, especially pulses, which can increase prices.

Women's participation

Srinivasan said more women’s participation is needed in the banking sector, as diversity helps massively.

"I would like to say that other banks in India should copy Federal Bank in terms of women in the workforce. About 43 percent of our workforce is women," he said.

Earlier, in an exclusive conversation with Moneycontrol on September 11, Shanti Ekambaram, Whole-Time Director of Kotak Mahindra Bank, said that the bank has never treated her differently just because she is a woman.

"I never think that I'm a woman and I can't do something. In any workplace, if you want to do really well, you forget that you are from a different gender. You have to focus on competence and deliver what it takes," said Ekambaram while replying to a question about challenges she faced as a woman banker.

Women made up only 10 percent of the banking workforce up until the 1990s. Only the clerical grade had a higher percentage of women, at 22 percent, in 2005-06. It went up to 27 percent in 2015-16, and 31.7 percent in 2020–21 for the clerical cadre, according to RBI data. Overall though, despite a rising trend in women's employment in Indian banking, just 3,97,005 of 16,42,804 employees in 2021-22 across all scheduled commercial banks — or 24.17 percent of the workforce — were female.

Private sector banks have approximately 1,34,000 female officers out of 6,14,000 employees in that grade, or 21.96 percent. In public sector banks, out of 3,88,000 officers, only about a lakh — or 26.34 percent — are women.