Bankers, by and large, feel that the interest rate cycle has reached its peak. The 50 bps cut in repo rate is therefore seen as the first step towards a reduction in interest rate. Industry associations have in the meantime hailed the RBI's decision to slash the repo rate by 50 bps to boost growth. Whether the banks will effect a reduction, remains to be seen. “It's a question of time,” said the Chief Executive of City Union Bank, Dr N. Kamakodi.

Terming it as a forward-looking policy, Karnataka Bank has said RBI policy is aimed at stimulating growth and investment scenario.

Mr P. Jayarama Bhat, Managing Director of Karnataka Bank Ltd, told Business Line that the RBI has indicated limits on further reduction in policy rates. “It is a balanced act. It will support growth,” he said.

Mr P.R. Somasundaram, Managing Director, LVB, said: “We are perhaps moving to a scenario where growth concerns will be addressed.” Asked if the bank would pass the rate reduction to its customers, Mr Bhat said the ALCO (asset-liability committee) of the bank would meet soon and take a decision on this.

Besides Karnataka Bank, the Chiefs of other smaller banks such as Karur Vysya Bank, Lakshmi Vilas Bank, City Union Bank and Catholic Syrian Bank also indicated that their ALCO would be meeting shortly to take a decision on this. Bankers maintained that the rate cut decision and timing would depend on the portfolio of individual banks. Mr Bhat said that indicative projections for non-food credit growth of 17 per cent and deposit growth of 16 per cent look to be achievable. The leeway given in the MSF (marginal standing facility) will improve liquidity and will reduce cost of borrowings of banks, he added.

>vinayakaj@thehindu.co.in

>lnr@thehindu.co.in

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