Bankers welcome RBI’s 50 bps hike in repo rate

Bankers welcomed the 50 bps increase in the repo rate by RBI on Friday, saying the move helps manage the growth and inflation dynamics as a gradualistic approach is welcomed amid rising global uncertainty.

Bankers are of the opinion that a cautious monetary policy will help address the risks of rising instability in the global economic and financial environment.

SBI Chairman Dinesh Khara opined that the monetary policy statement, which was on expected lines, is a nudge to stay agile and nimble in a volatile global environment.

A K Goel, chairman of the Indian Banks Association, said that the 50 bps repo hike is on expected lines due to the evolving macroeconomic developments domestically and across the globe.

There is risk to our external sector, especially exports, considering the headwinds from the geopolitical tensions and tightening of the global financial conditions.

Goel, who is also managing director of Punjab National Bank, welcomed the various measures like the 28 day variable rate repo auctions VRRR with 14 day VRRR to tide over temporary moderation in surplus liquidity in the system.

He thanked the regulator for agreeing to release a discussion paper on the expected loss based approach for loan loss provisioning by banks, in response to IBA's recent representation.

The SBI chairman said that both moves will provide an impetus for the secondary loan market, better price discovery and front-loaded provisioning for banks, and that the proposed discussion paper will introduce an alternative framework for securitisation of NPAs.

The rate hike helps manage the growth and inflation dynamic, as the economy is facing heightened economic and geopolitical uncertainty and exceptionally volatile global markets, according to Zarin Daruwala of Standard Chartered Bank India.

She said that easing the criteria for allowing rural banks to provide internet banking to their customers will further the digital banking push.

Surojit Shome, DBS Bank India's managing director, said that the RBI's withdrawal of its accommodative stance and the 50 bps hike was necessary to contain inflation and manage emerging macro risks because of the prevailing inflationary headwinds and geopolitical uncertainty.

Suresh Khatanhar of IDBI Bank said RBI moves will provide stability to the rupee and contain prices.

Pralay Mondal, managing director of the CSB Bank, said that RBI move to have probability-based loan loss provisions is a good step in the right direction.

Venkatraman Venkateswaran of the Federal Bank said the policy is a balance between inflation control and growth.