Bankers welcomed the 35 basis points increase in repo rate by the Reserver Bank of India’s monetary policy committee (MPC), saying the moderate fifth successive rate hike ensures a fine balancing trade-off between growth and inflation.The rate-setting panel of the central bank in a 5:1 decision on Wednesday rose the repo rate by 35 basis points, taking the key policy rate to 6.25 per cent.
The Reserve Bank also lowered the country’s GDP growth forecast to 6.8 per cent for the current fiscal from 7 per cent earlier, on account of continued geo-political tensions and tightening of global financial conditions.Dinesh Khara, State Bank of India chairman, said, “The policy statement is nuanced, nimble, forward-looking and ensures a fine balancing trade-off between growth and inflation. A marginal downward revision in growth estimates reveal that the only certainty in the current environment is uncertainty.” He also welcomed the operational flexibility being given to banks to manage their investment in government securities by offering them more time to handle HTM (held to maturity) G-secs, saying the move “will have an orderly impact on domestic yields”.
The chairman of bankers’ lobby IBA, A K Goyal said the monetary policy is largely focusing on controlling prices. Since inflation is expected to fall below 6 per cent by Q4FY23, it is reasonable to expect lower rate hikes going forward, he added.Zarin Daruwala of Standard Chartered Bank said, the MPC has struck a delicate balance between reining in inflation and avoiding a premature pivot to support growth.”RBI’s confidence around GDP and external sector augurs well for the economy even as global growth slows. We may continue to see rates at higher levels as the RBI continues to remain vigilant on inflation,” she added.On the extension of the enhanced HTM limit by a year, she said it will help stimulate demand for G-secs and also lend stability to yields.
Similarly, she said the enhancements to UPI mandates and enabling recurring payments on Bharat Bill Payment System will increase the acceptance of digital payments, especially for services such as hotels, education fees, rent payments, tax payments etc.Murali Ramakrishnan of South Indian Bank said the initiatives on UPI is more well-rounded and will further strengthen the digital payments ecosystem.Shanti Ekambaram of Kotak Mahindra Bank said given the continuing global headwinds, she expects RBI to be nimble and take action wherever warranted.Citi India chief executive Ashu Khullar said if inflation continues to trend down, the central bank may adopt a more growth-oriented policy going forward.