New Delhi: Several top bankers of the country have supported the Reserve Bank’s decision of not revising the benchmark interbank lending rates despite inflationary pressures, calling it a pragmatic and sensible decision but also asking for more frequent revisions of the RBI’s forecasts about GDP growth and projection of inflation.
Dinesh Khara, Chairman of India’s largest bank, the State Bank of India, says the RBI monetary policy announcement is a pragmatic assessment of the current uncertain economic environment. He also said that the RBI has rightfully re-calibrated the growth and inflation numbers and announced a slew of measures to support the government borrowing program in a non-disruptive manner.
“The measures to allow interoperability in card-less withdrawal at banks will give a further impetus to QR code-enabled payments. The decision to set up a robust governance structure for digital payments is a logical corollary of this move. Overall, the policy announcement now prepares us for a world after COVID,” Khara said in a statement sent to ETV Bharat.
Atanu Kumar Das, MD, and CEO, Bank of India, says the policy continues to have a ‘feel-good' factor from the point of view of a durable recovery process. “The projected numbers perhaps warrant more frequent revisits in the face of dynamically evolving operative environment, within and outside India,” Das told ETV Bharat.
Prasenjit K Basu, Chief Economist of ICICI Securities, says the Monetary Policy Committee sensibly decided to keep monetary policy accommodative despite inflation being marginally above its tolerance band. “Two reasons justify the policy. First, inflation is high partly because of (external) supply shocks, so reducing aggregate demand through monetary tightening will not address the issue. Second, there is a considerable output gap, with the economy having contracted 6.6 percent in FY21, and estimated to have grown 8.9 percent in FY22 which is far from closing the gap, in an economy with potential growth of 7 percent annually,” Basu said.
Basu says maintaining an accommodative stance is therefore the right approach. “Loan growth needs to accelerate to enable a rebound in domestic demand, but the RBI will also withdraw accommodation tactically if inflation gets too far from the target,” observed the economist.
Indranil Pan, Chief Economist of YES Bank, says the Reserve Bank has taken more than one step towards preparing the market for an eventual increase in the repo rate amidst the 'tectonic' shifts in global conditions. “This position is made clear as the governor indicated that the order of preference for RBI now is inflation, growth, and financial stability, rather than the post-COVID-19 preference of preserving and supporting growth momentum,” Pan told ETV Bharat.
The YES Bank’s chief economist says the process of neutralizing the monetary policy had already started with the withdrawal of ultra-comfortable liquidity. “In this policy, the operative rate was increased by 40 basis points (0.4 percent) with the institutionalization of the Standing Deposit Facility. With this, RBI has almost buried the reverse repo as an instrument,” noted the economist. Indranil Pan expects that RBI’s accommodative stance will be made 'neutral' in June this year and the first repo rate increase can come through in August.
Also read: RBI did the right thing but scope for 0.5% increase in interest rate: Sunil Sinha
