Borrowing costs will go down, say bankers

Though the 25-basis-point repo rate cut by the RBI was on expected lines, it will help lower borrowing costs, said senior bankers.

Arundhati Bhattacharya, Chairman, SBI : The decision to lower MSF rates to 7 per cent as well as the daily CRR maintenance ratio at 90% are welcome moves which will help banks in terms of lower borrowing cost and better cash management planning.

Further, to manage system liquidity, the RBI will continue to inject liquidity under overnight repos and 14-day term repos but progressively lower the average ex ante liquidity deficit in the system from 1 per cent of NDTL to a position closer to neutrality. In fact, the decision to narrow the band is a bold step but will require the RBI to be in constant watch mode to ensure the overnight rates do move in the corridor.

Handholding MSMEs through appointment of credit counsellors would be a win-win on the part of both banks and the former. The proposal to replicate the insurance agent certification model for business correspondents in the banking space will ensure transparency and robustness in selection process.

Chanda Kochhar, MD and CEO, ICICI Bank : Higher than normal systemic liquidity deficit has been a matter of concern among market participants. The announcement that the RBI will progressively lower the average liquidity deficit in the system from 1 per cent of NDTL to a position closer to neutrality significantly addresses this concern. This should support the transmission of RBI’s accommodative policy stance. The reduction in the repo rate signals that overall inflation trends are in line with expectations, and also responds to the government’s commitment to fiscal prudence.

Ashwani Kumar, Chairman, Indian Banks’ Association : Strengthening the existing business correspondent model through the creation of a Central Registry and advanced training and certification is the need of the hour. The IBA has already initiated the process of formalising the same. The rationalisation of branch authorisation policy and redefining branches and permissible methods of outreach will give a further fillip to the financial inclusion goals.

Rana Kapoor, MD & CEO, YES Bank : By pulling the trigger on rate cut, along with a shift in liquidity stance towards a neutral setting, the RBI set an optimistic tone for the new fiscal year. However, given its own acknowledgement of enabling conditions on three macro fronts being more conducive — lower-than-anticipated inflation trajectory, government’s positive administrative steps and, more importantly, display of an exemplary fiscal rectitude in Union Budget FY17 — the RBI could have set off a higher rate reduction in a bid to support growth revival. Nevertheless, the RBI’s response matrix to an elevated banking system liquidity deficit has been the only heartening measure in today’s policy announcement. Its readiness to respond to the liquidity needs of the banking sector is testimony to the dynamic and ever-evolving policy formulation at the central bank.

Jayarama Bhat, MD & CEO, Karnataka Bank : With the key conditions such as decline in inflation and the government sticking to its fiscal consolidation targets being supportive, the continuance of the accommodative stance by Reserve Bank was very much expected. The narrowing of the LAF width and relaxation in maintenance of daily CRR to 90 per cent, along with OMO and targeting supply of durable liquidity into the system, will help banks manage liquidity better.

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