The Monetary Policy Committee, on Friday, decided to keep the repo rate unchanged for the fourth consecutive time at 6.5 per cent while maintaining its ‘withdrawal of accommodation’ stance to tackle inflation. Here’s what bankers think about the central bank’s latest monetary policy decision:

Dinesh Kumar Khara, Chairman, State Bank of India

The ability of RBI to remain steadfast and focused on pitching key growth deliverables bodes well, even as global uncertainties pick pace outside. The inclusion of PM Vishwakarma scheme in PIDF (Payments Infrastructure Development Fund) will enhance market breadth and depth benefitting small scale artisans. The IRAC norms proposed for key infrastructure projects could rekindle incremental investment appetite.

A K Goel, Chairman IBA, and MD of Punjab National Bank

Softening of the core inflation to 4.9 per cent during July-August 2023 is a positive sign and would have given comfort to RBI for keeping the status quo on its retail inflation projection for FY 24. It has also been highlighted that the aim of the RBI is to bring the inflation to 4.0 per cent and not only to keep it in the band of two-six per cent emphasising that the focus of RBI is still on managing the inflation at the comfort zone. On the regulatory front, a proposal to have a comprehensive regulatory framework governing project finance and to harmonise the instructions across all regulated entities is expected to introduce more clarity on the framework.

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

The RBI remains vigilant on inflation and is ready to act if required. As I-CRR unwinds, the core liquidity surplus will grow and could be mopped up through open market G-sec sales in the coming months. The internal ombudsman norms for all regulated entities and higher surveillance required of banks and NBFCs, will make the financial system more resilient. System stability is also likely to benefit by NBFCs being allowed to use credit mitigation instruments.

Venkatraman Venkateswaran, Group President & CFO, Federal Bank

Considering that the transmission of the rate hikes hasn’t been fully passed on, it was a prudent decision to adopt a wait-and-watch approach. Inflation management remains a focal point for the central bank, with a clear indication that the MPC will intervene if necessary to prevent any spillover effect from food or oil price inflation. Given the broad-based credit growth and the relatively favourable state of the Indian economy compared to the global economy, banks will continue to pursue retail deposits.

Virat Diwanji, Head – Consumer Bank, Kotak Mahindra Bank

The commentary by the Governor has left several clues into the emerging scenarios, including the increasing inflationary pressures in the system, both internal and external, and the increasing inclination to suck out additional liquidity. However, the GDP growth forecast for FY24 at 6.5 per cent is comforting, backed by robust domestic economic activity and strong consumption. A nascent revival in rural growth is most welcome as it will add to the resilience of the overall economy.

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