RBI's monetary policy announcement is on expected lines, say bankers

Here's what bankers have to say about the RBI's monetary policy where the central bank kept the key policy rates unchanged. Repo and reverse repo rates are unchanged at 6 percent and 5.75 percent, respectively.

The RBI also cut the statutory liquidity ratio (SLR)—the proportion of deposits banks are required to park in government bonds— by 50 basis points to 19.5 percent from 20 percent currently, a move aimed at unlocking more funds for banks to lend.

Arundhati Bhattacharya, Chairman, SBI

India is in the middle of several tectonic shifts in its economic structure. The benefits of initiatives like the GST, and drive towards a cashless economy,  will take some time to be fully absorbed in the system. In the interim period, the RBI’s fourth bi-monthly policy, argues for calibrated public spending in infrastructure, investment projects and affordable housing to provide support for growth numbers. At a tactical level, the government must address the capital situation at public sector banks to ensure that credit disbursal to the productive sectors continues uninterruptedly.

Chanda Kochhar, MD and CEO, ICICI Bank

The RBI’s announcement today to keep the policy rate unchanged was on expected lines. The MPC has not viewed the recent growth slowdown as being structural in nature and is expecting it to be transient with growth prospects likely to improve over the medium term. The MPC has also reiterated the need to support investment activity and the gamut of measures that are being undertaken by government will help this process significantly. By retaining the focus on inflation targets, this policy ensures that the confidence of the investors on the Indian macro-economic indicators will continue.  Further policy action will be contingent on the evolution of the output gap and its impact on the inflation trajectory.

Rajeev Rishi, Indian Banks’ Association (IBA) Chairman

Managing inflation is the core theme of Monetary Policy Committee and the latest retail inflation reading of 3.4 percent with a potential upside risk, did not support a repo rate cut at this juncture. Hence, this measure was on the expected line. IBA had also recommended for further recapitalization of PSBs and it is heartening that the central bank is also supporting our views.

Dinabandhu Mohapatra, MD & CEO, Bank of India

The policy was more or less along expected lines. Key policy rates have been kept unchanged due to upside bias to inflation.  A major announcement was the cut in SLR from 20 percent to 19.5 percent w.e.f October 14, 2017 and cut in HTM limit to 19.5 percent by March 2018. SLR cut will notionally release Rs 50,000 crore systemic liquidity but banks are anyway holding excess SLR. This can be used for LCR purposes. In short, the MPC has acknowledged upward inflationary bias while also being mindful of downside risks to growth due to various domestic and international macroeconomic factors.

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

"Repo rate remains at 6 percent and the monetary stance, neutral. It has, however, cut the banks' statutory liquidity ratio (SLR) or the compulsory bond holding by 50 basis points to 19.5 percent. This is in line with the central bank's commitment to adhere to the Basel III framework on liquidity standard of which liquidity coverage ratio is an integral part. Against the backdrop of its concerns on growth and rise in inflation, the status quo on the policy rate is par for the course. Its future action will be data driven."

Rana Kapoor, MD & CEO, Yes Bank

The monetary policy status quo reflects prudence and pragmatism amid global developments including structural adjustments in US along with firming up of the dollar and oil prices. I expect domestic disinflationary impulses like subdued capacity utilization, proactive food price management, and rationalization of fuel tax rates to have an offsetting effect. The impact of structural reforms like the GST and IBC will also boost capacity augmentation, providing room for 25-50 bps rate cut in the coming months.