Cheering to the Reserve Bank of India's (RBI) decision to keep all key rates unchanged, bankers welcomed the move and said that it would help the industry as well as interest rates to stabilise. Bankers further added that the central bank's view towards inflation easing down would mean going forward RBI would soon start to take measure towards boosting growth. But as far as a possible reduction in lending rates by banks goes, bankers ruled out the possibility of any reduction in their interest rates.
In a surprise move, the RBI left the repo rate unchanged at 7.75 per cent, while the cash reserve ratio (CRR) too is retained at 4 per cent. Most market participants were expecting a minimum 0.25 per cent rate hike today after November wholesale price index (WPI) based inflation rose to 14-month high of 7.52 per cent while CPI (consumer price index based) accelerated to 11.24 per cent, a nine-month high.
Sl Bansal, Chairman and Managing Director, Oriental Bank of Commerce (OBC) said, "RBI's decision to maintain status quo is likely to stabilise interest rates. I think that the rates were kept unchanged as the growth has been quite low. Also as the RBI Governor said in his speech that his main focus is on core inflation, therefore by keeping the rates unchanged it is expected that in the long run food inflation is likely to come down."
Complimenting RBI Governor Raghuram Rajan's foresight, Federal Bank's President (Treasury), Ashutosh Khajuria said, "I strongly think that the policy makers should now switch their focus towards growth and RBI's move to maintain rates just proves that Rajan has foreseen that the inflation would cool down in the coming months. We expect food inflation to ease and hope RBI would start the process of reducing rates from early next year. Central bank might continue with status quo in the next policy but there after we think rate cut would happen."
Commenting on the policy review, ICICI Bank's Managing Director and CEO, Chanda Kochhar said that in the present macroeconomic situation, RBI'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 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," said Kochhar. Responding to a possibility of rate cut, State Bank of India Chairperson Arundhati Bhattacharya said, "Our rates are still higher than what it was on July 15, I see no immediate response toward rate cut."
She further added, "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."
Bank of India's Chairperson, V R Iyer said there was no room for cutting lending and deposit rates at the moment. "Inflation is very high and there is hardly any scope for us to reduce the interest rate on deposits, at least at the year end. Absolutely, we will not be able to do that at the moment," Iyer said, adding that immediately there will not be any room for the bank to reduce the base rate. He also added that the bank will be able to take a call and reduce the bulk deposit rate.
Indian Overseas Bank Chairman and Managing Director M Narendra said that the bank is already providing loans to many sectors at lower interest rates and it will not be possible to cut rates as this juncture. Meanwhile, HDFC Bank too welcomed the move saying it appears that RBI's actions are driven not by focusing on the headline figure itself but instead focusing more on the internal drivers of headline inflation.