Bankers ruled out an immediate cut in lending rates saying they will wait for the Budget, but termed the Reserve Bank of India (RBI) policy review as growth-oriented as the reduction in SLR will release more funds into the system.
Commenting on the policy, wherein the RBI adopted a status quo stance, State Bank of India chief Arundhati Bhattacharya said the policy is in line with market expectations.
ICICI Bank Chief Executive Officer and MD Chanda Kochhar said: “The decision to hold the policy rates was expected given the rate cut just a few weeks ago, and in line with the RBI’s approach of observing inflation trends over a period of time before taking policy action.”
The RBI left the policy rates unchanged in today’s sixth bi-monthly monetary policy review, saying after the surprise January 15 cut there have been no data warranting a fresh easing today.
When asked whether SBI will cut lending rates, Bhattacharya said: “I think the Governor has very clearly said it takes time for these things to work itself into the entire industry. Unless we see the credit demand picking up, I think it’s going to take a little time to cut rates.”
Bank of India Chairman and Managing Director Vijayalaxmi Iyer said banks will take a call on rates post-March only as credit growth is yet to pick up and NPA problem persists.
Bhattacharya welcomed the flexibility regarding the DCCO (date of commencement of commercial operations) saying the move will enthuse companies with strong balance sheets to consider taking over stuck projects.
Bhattacharya said reducing SLR — or the amount of funds that lenders must set aside– by 50 basis points to 21.5 per cent is expected to provide growth supportive liquidity of about Rs 45,000 crore. For SBI the move will release about Rs 7,000 crore, she added.
Yes Bank’s Rana Kapoor said, “The move will enhance banks headroom to increase lending to productive sectors as growth picks up.”
Kochhar said the introduction of differential rate structures for non-callable deposits will help banks in asset-liability management.
The liberalisation of outward remittance limits reflects the substantial reduction in our vulnerability to external events, she added.
“Increase in liberatlised remittance scheme (LRS) to USD 250,000 reflects confidence of the regulators in consistency in foreign inflows. With increase in minimum investment period to 3 years in corporate bonds, there will be stability in investment and the volatility will reduce,” Iyer said.
Bankers said RBI would wait for the budget before taking a call on further cut in repo rate.
“Further moves depend on fiscal consolidation and evolution of global and domestic developments. Primarily the GDP numbers expected later this month, inflation numbers and fiscal road map to be laid down by the government in the next budget will form the basis for the next move on rate cut,” Iyer said.