By Christina Titus
RBI governor Sanjay Malhotra and deputy governors spoke on a wide array of issues during the post-policy press conference. Excerpts:
With the neutral stance, are you saying that there will be a long pause? Was there is a voting on stance?
It will depend on data. A neutral stance means it can go either way. If the growth is weaker, it will go down. If the growth is good and inflation is going up, it can mean that the repo rate can go up.
So, it will depend on how the data, both on inflation as well as growth. There was a discussion on it (stance change) because we need to give a guidance. So, there was a discussion and all the six members were of the view that we should change it to neutral.
Are you satisfied with the monetary transmission that has happened so far?
Going by past trends, the transmission has happened much faster. In the money markets, in fact, there was a huge transmission of more than 50 basis points.
The average deposit rates have declined by 27 bps while lending rates on outstanding credit have come down by 17 bps since the February rate cut of 25 basis points. In terms of fresh loans, reductions has started, but it is slow — around 6 bps as per data.
It is much faster than other times. Normally, it takes six to nine months. It has only been four months from the first policy cut. I think this is a very good transmission. However, we need to do it faster and that is why we have front-loaded some of our actions.
What is the growth boost that you are expecting from this cumulative 100-bps rate cut? And thereby, would there be a revision for FY26?
Obviously, it has a positive impact. It will be very difficult to assess this transmission from monetary policy to the credit rates and then to the real economy. It takes a minimum of 6-9 months. We will see the impact of this in the later half. So, for this year, especially when there is so much of an uncertainty, we would not be in any position to give you to what extent it will impact the GDP.
CRR, historically, has been at the 4% level. Is there a renewed thinking on the CRR front, which is why you have gone ahead and cut it to 3%?
Over the years, the CRR has mostly remained at 4%. During COVID, we reduced it by 1%. Now, these reserves are basically kept for liquidity management. But as of now, it seems that 3% is a comfortable reserve ratio to have from a liquidity management perspective. Apart from providing liquidity, it will also reduce banks’ costs and improve their NIM by 7 bps.
You have said that the monetary policy is left with very little space to support growth. Does it mean that you would expect fiscal authorities to support the rest of the growth?
I believe in doing my work. And we have done that bit. And obviously it is expected that everyone else will be doing their bit. So that is not something for me to say. It is not appropriate. I believe in doing my job and that is what we will continue to do.
If banks really do not do the transmission despite everything that you have done for banks, which they have asked for, can you take any action?
Ultimately, the monetary policy is a necessary but not a sufficient condition. For monetary policy transmission to happen, there are many other things in play. It will depend on the macroeconomic conditions and the demand for credit. We have to leave it to market forces. We cannot start regulating that by saying provide credit or reduce rates.