Banks say RBI policy on expected lines signal MPC member’s dissent on accommodative stance
Bankers reacted to the policy review and other measures announced by the RBI as being in line with expectations on Friday, but flagged the dissenting vote on maintaining the accommodative stance as something to watch.
The RBI has also “pushed” central governments and said they need to reduce high indirect taxes on petroleum products to reduce price pressure Raj Kiran Rai G, president of the Indian Banks Association (IBA ), which also heads the state-run Union Bank of India, said in a statement.
“… the policy announcement regarding the accommodative stance and policy signal rates is on expected lines. It is relevant to note that while the decision of the Monetary Policy Committee to maintain the accommodative stance was unanimous in the June policy, this is not the case in this policy, ” Rai said.
He pointed out that the central bank expects headline inflation to hit 5.7% in fiscal year 22 from 5.1% previously, indicating an accumulation of price pressures. As crude oil prices are at high levels, there is price pressure. In this policy, the RBI again pushed the central government and state governments to reduce the indirect tax component of prices at the pump in order to reduce the pressure on prices. he maintained the status quo on rates, as a pragmatic rule that strikes the right balance between “position and strategy”.
“While the policy stance remains accommodative to continuously support growth, a cautious liquidity management recalibration strategy is clearly indicated with the rollout of VRRR (Variable Rate Reverse Repo),” Khara said.
He said the policy had also caused banks to switch to another benchmark rate with the LIBOR shutdown.
HDFC Bank chief economist, the largest private sector lender, Abheek Barua, said the RBI has taken steps to normalize liquidity given the pressure on inflation and high levels of systemic liquidity.
“… this liquidity normalization should be seen as a smooth calibrated move, in part in response to a large excess liquidity in the system, and not as an aggressive pullback in monetary policy support,” he said. -he declares.
Kotak Mahindra Bank Group Chairman Shanti Ekambaram said the RBI remains focused on growth, which is seen as a “nascent and hesitant recovery”.
Zarin Daruwala, a foreign lender to Standard Chartered Bank, also called the RBI’s view “pragmatic”, given the higher inflation rates and ample liquidity in the system. The decision to sterilize some of the excess liquidity through floating rate repo auctions was called prudent by her, adding that the three-month extension of the TLTRO online will help stressed sectors / NBFCs through ‘a safety net.
“The extension of the TLTRO by the central bank until December 2021 will ensure adequate liquidity support to the system, while the favorable interest rate environment, standardized supply chains and improved business activities that take The scale since reopening after the second wave bodes well for the growth of our industry and economy-based business, ”said Umesh Revankar of Shriram Transport Finance.
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