The Hindu Business Line : RBI’s wait and watch move logical, say bankers

Hyderabad, Jan. 28 The RBI’s decision to leave key rates unchanged is a fine policy in the current economic scenario, Ms Renu Challu, Managing Director, State Bank of Hyderabad, said. The inflation figures were higher last week compared with previous figures. RBI would not like any inflationary tendencies at this juncture.

In addition, there is ample liquidity in the system and call rates have also gone down. Hence, RBI appears to be in a wait and watch mode, she said.

Our Coimbatore Bureau reports: The Executive Director of City Union Bank, Mr N. Kamakodi, said: “The regulator has done everything to keep the liquidity position comfortable. The RBI is probably watching the impact of the CRR and repo rate cuts announced earlier. Having acted fast in the past, the RBI probably did not perceive the need to effect any cut now. This wait and watch decision looks logical,” he said.

“Since the Reserve Bank initiated necessary steps as and when needed, we did not expect the regulator to announce any rate cut today,” the Managing Director of South Indian Bank, Dr V.A. Joseph, said.

On the rise in the NPA level, he said SIB took a cautious approach and there was no compromise on asset quality.

Mr Rana Kapoor, Managing Director & CEO, YES Bank, said: The RBI has adopted a wait and watch approach with an assurance to “take calibrated monetary policy actions and at the appropriate time”. The deepening global financial crisis and the follow-on sharp domestic economic pain have continued to adversely impact India’s growth trajectory via the real as well as financial market channels.

Our Chennai/Mumbai Bureaus report: Mr Romesh Sobti, Managing Director and CEO, IndusInd Bank, said, “RBI has left the rates unchanged as it felt no compelling reasons to cut rates as both lending, deposit and inflation rates are tapering. I think the RBI wants the lag effect of the earlier monetary policy and rate cuts to percolate into the system before further cuts.”

“Supporting domestic spending and demand is the key. In my view, the RBI has correctly highlighted the need to ensure a steady flow of credit, which must flow towards investments and consumption. Going forward, we can expect the RBI to retain a dovish stance, lowering interest rates and taking steps to ensure the banking system has adequate liquidity,” said Mr Neeraj Swaroop, Regional Chief Executive, India & S. Asia, Standard Chartered Bank.

“The “status quo” on the policy rates by the RBI is a step in the right direction at the current juncture, considering that rates have been aggressively cut in the recent months. That along with other measures has ensured easy liquidity conditions in the banking system,” Ms Meera Sanyal, Country Executive – India, ABN Amro Bank, said.

Mr Ashok Wadhwa, CEO & Managing Director, Ambit Corporate Finance, said: The Policy announcement was a non-event as status quo was maintained on key policy rates. Though there is room for another 50 bps cut on policy rates, the RBI may wait for a further drop in inflation (to around 4 per cent levels) before easing policy rates further. Hence, the RBI’s next move would be event-driven rather than time-driven.

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