The Reserve Bank of India kept the repo rate unchanged at 5.5% in its latest Monetary Policy Meet. During his speech, RBI Governor Sanjay Malhotra also made a slew of announcements for ease of doing business and this propelled Dalal Street higher.
Reacting to the policy, industry veterans such as Keki Mistry, Dinesh Khara and Lalit Tyagi believe the policy goes well beyond just repo rates, highlighting the central bank's focus on growth.
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Keki Mistry, former vice-chairman and CEO of HDFC, called the policy “very good,” pointing out that inflation was projected to come down to 2.6%, while growth estimates had been revised upwards.
“It's very positive. The rural economy is doing well, and GDP numbers are rising. A combination of rural doing well and GST rate cuts will facilitate growth,” he said.
Mistry expects RBI to cut rates in the next policy meet in December. “There is no reason to cut rates now. Maybe they will wait for global cues and cut rates in the next meeting,” he said.
Mistry also welcomed the governor's clarification on the segregation of roles between banks and their subsidiaries, calling it “a big concern” that has now been addressed.
On provisioning standards, he added: “Standardisation of ECL norms across all entities is an important thing to have, so in my mind, it is a good thing.”
Meanwhile, Lalit Tyagi, executive director of Bank of Baroda called the policy "biased towards the pause."
He said the RBI's proposal for risk-based deposit insurance premiums will help bring down the cost of deposits, while GST cuts would give a boost to the credit cycle. “Banks are in a better shape to implement ECL guidelines, and these guidelines will make the bank's balance sheet strong,” he said.
Former SBI chairman Dinesh Khara also reacted to the policy, calling it "pro industry".
"Making infrastructure financing cheaper, supporting Indian exporters and internationalisation of rupee will go a long way to support the Indian economy," he said.
Khara also said the RBI seems to be frustrated by the slow transmission of monetary policy, especially having cut rates by 100 basis points already.
"We have to be mindful of banks, the cost of deposit are a challenge as banks are competing with other market instruments. They are doing cost optimisation to maintain their NIMs and pay more to depositors. Banks are looking for the right opportunities for lending," he said.
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