Bankers today said the liquidity tightening measures announced by the Reserve Bank of India (RBI) are temporary and hoped they will be rolled back once the rupee stabilises.
"These measures are temporary, to calm down volatility. We are not taking that these measures will be long term. I think once the rupee stabilises, these steps should be largely rolled back," State Bank of India chairman Pratip Chaudhuri said.
In a separate note released later, the bank said: "The measures...are not seen by SBI as indicative of any systemic problem or deeper malaise. Neither the management nor the board of SBI that met today in Mumbai felt that this requires any adjustment of lending."
The RBI last night announced a slew of measures such as raising the cost of borrowing by banks by 2 percentage points to 10.25 per cent and announcing the sale of bonds worth Rs 12,000 crore through open market operations to suck liquidity to check the rupee slide.
The rupee had last week touched a life-time low of 61.21 to a dollar.
On the impact of the RBI's measures on interest rates, Mr. Chaudhuri said: "The impact on loan growth depends on how long these measures stay. Deposit rates do not have such a close correlation with the money market."
The RBI's measures strengthened the rupee to 59.20 against dollar in noon trade today, against the previous close of 59.89.
"The RBI action is towards the forex side of the market and to contain volatility in the rupee," Bank of Baroda chairman S.S. Mundra said, adding that it would be too early for the RBI to change policy stance.
The RBI is scheduled to announce its first quarter monetary policy review on July 30.
UCO Bank chairman Arun Kaul said the RBI's step is a temporary measure and the bank has to wait for some more time to decide on the impact of this move.
"The objective of RBI's action is to compress liquidity. The implications are same as repo rate hike. The RBI has opted for that time which is slack in terms of credit demand," Mr. Kaul said.
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