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Bankers welcome RBI decision on key policy rates

December 18, 2013 17:58 IST

Raghuram RajanBankers on Wednesday welcomed the Reserve Bank of India's move to keep key policy rates on hold saying it will help recovery and macroeconomic stability.

"The decision to keep policy rates unchanged is welcome in view of continued risks to growth and keeping in mind the possibility of softening in food inflation and the lagged effect of earlier rate increases," Chanda Kochhar, managing director and chief executive of ICICI Bank, said.

In a surprise move, the Reserve Bank on Wednesday left the repo rate unchanged at 7.75 per cent, while the cash reserve ratio too is retained at 4 per cent.

Most market participants were expecting a minimum 0.25 per cent rate hike on Wednesday after November wholesale price index-based inflation rose to 14-month high of 7.52 per cent while consumer price index based accelerated to 11.24 per cent, a nine-month high.

State Bank of India Chairperson Arundhati Bhattacharya said: "It really hurts the depositors and we would not like to do that.

“Our rates are still higher than what it was on July 15, I see no immediate response toward rate cut." "In view of the fact that liquidity is ample in the system, we will definitely be looking at the rates and we will try to see if something needs to be done. . .may be for the bulk (depositors) we might look at doing something," she said.

Kochhar said considering the current macroeconomic situation, the Reserve Bank's commitment to managing adequate systemic liquidity and its balanced approach to growth and inflation should be seen as positives for economic recovery and stability.

The RBI in the policy said while CPI and WPI inflation, excluding food and fuel have been stable, despite a steady and necessary increase in administered prices of fuel towards market levels, the high level of CPI inflation, excluding food and fuel, leave no room for complacency.

Indian Overseas Bank chairman and managing director M Narendra said: "The RBI has better perspectives on the macroeconomic factors.

“They must be knowing that WPI and CPI data are not likely to be on upward trend going forward and so they have kept the rates static".

However, bankers said they will maintain a status quo on the lending and deposit rates.

Image: Raghuram Rajan

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