RBI rate hike to manage growth-inflation dynamics, say bankers

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

Bankers are of the view that a cautious monetary policy will help better 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 nimble and agile in a volatile global environment.

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

He, however, was quick to note that considering the headwinds from the geopolitical tensions and tightening of the global financial conditions, there is risk to our external sector, especially exports.

Goel, who is also the 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 expected loss based approach for loan loss provisioning by banks, in response to IBA's recent representation.

The SBI chairman also welcomed the proposed discussion paper to migrate to an expected credit loss regime for provisioning and introducing an alternate framework for securitisation of NPAs, saying both the moves will provide an impetus for secondary loan market, better price discovery and front-loaded provisioning for banks.

Zarin Daruwala of Standard Chartered Bank India said the rate hike helps manage the growth and inflation dynamic as the economy is faced with heightened economic and geopolitical uncertainty and exceptionally volatile global markets.

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

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

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

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

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