Even as the RBI raised the policy rate by another 25 bps today, bankers are optimistic of the country’s growth prospects taking cognizance of the central bank’s upward revision in growth projections. Most admitted that inflation will continue to be a concern for the coming months, especially due to sticky core inflation, but believe that the threat or challenges from elevated inflation will start to abate.

Following are the views by some bankers on the MPC Policy decision and announcements:

Dinesh Kumar Khara, Chairman, State Bank of India

Continuing strong job data from Fed has made monetary policy making a delicate balancing act for emerging economies’ central banks. Beyond the rate hike, there are a bouquet of policies that attend the micro structure of the market. The proposal to address the issue of penal charges on services will bring a rule based regulation. The initiatives on climate risk will improve compliance, capital budgeting and financial disclosures for banks. Providing further impetus to TReDS platform in terms of further augmentation of activities and allowing lending and borrowing government securities will add depth and aid price discoveries across markets.

Zarin Daruwala, Cluster CEO, India and South Asia, Standard Chartered Bank

RBI’s confidence in the Indian economy came through as it revised its H1 2023/24 growth estimate upwards to 7 per cent. The 25bp repo rate hike was along expected lines and will continue to temper inflation and support growth. While the RBI sounded cautious on sticky core inflation, it will closely monitor the impact of future rate hikes on lending rates, some of which are already above the pre-pandemic levels.

Murali Ramakrishnan MD and CEO of South Indian Bank

We agree with the RBI’s continued withdrawal of accommodation measures to rein in inflation without denting the economy’s growth prospects. The revision of the repo rate by 25 basis points to 6.5 percent is a calibrated one as it further tries to control inflation while ushering overall growth. We anticipate that this will be the last of the announcements in the rate tightening cycle that began less than a year ago. Though inflation will remain above the targeted level for some time to come, it will not remain as big a threat. We look forward to a period of buoyant economic activity after a grim three-odd years.

Virat Diwanji, Group President and Head – Consumer Bank, Kotak Mahindra Bank

RBI hiked the repo rate by a moderate 25 bps with a much more optimistic commentary that predicted a more manageable inflation and an over 6 per cent GDP growth – painting India as a sweet spot among global economies. Obvious concerns include a sticky core inflation, ballooned by imported inflation, and worsening global demand that may put further pressure on the CAD and the rupee.

The central bank seems to have taken into account benefits to consumption from the Budget announcements on income tax and the capex hike besides a bright agriculture sector outlook. Urban consumption continues to remain robust as reflected by aviation, tourism, and other services sector growth. However, the lag effects of previous increases since May 2022 on credit offtake and consumption may impact growth in Q4FY24.

Ashu Khullar, CEO, Citi India and South Asia

The rate hike is in line with market expectations and the regulator, rightly so, will continue to keep an eye on inflation as India’s mid-to-long term opportunities remain intact. The proposal to permit lending and borrowing of government securities is a positive step that will provide market participants more flexibility and help deepen the bond markets.

Ashhish Vaidya, MD and Head of Treasury & Markets, DBS Bank India

This was a very balanced and forward-looking policy, with a clear indication that the inflation fight isn’t over, in the interest of maintaining long-term financial stability and giving due consideration to both domestic and global factors.

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