Bankers Hail RBI's Monetary Policy Focus On Taming Inflation

Bankers hailed the Reserve Bank's monetary policy focus on taming inflation and said the move reflects the central bank's continued effort towards non-disruptive trade-off between price stability and growth in a calibrated manner.

State Bank of India chairman Dinesh Khara said the policy statement is a comprehensive assessment of the growing uncertainties and is also an affirmation of the coordinated policy action by the government and the central bank to thwart the dangers of inflation.

The chairman of the nation's largest lender also said that enabling more headroom for urban and rural cooperative banks to finance the housing sector will bring about a level-playing field in the cooperatives space, while linking Rupay credit cards to UPI will add more avenues for growth and financial inclusion and convenience to customers.

National bankers lobby IBA chairman A K Goel, who also heads Punjab National Bank, said the policy is on expected lines given the hardening inflation.

Taking into consideration all the risk factors on price levels, the RBI-MPC (Monetary Policy Committee) has been unanimous to "remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth".

Flagging that inflation remains the key concern, he said all the quarterly projections of inflation are above 5 per cent. In short, maintaining price stability has taken the centre stage.

Continuing the focus on supporting growth, RBI has reiterated that adequate liquidity will be available in the system for all productive purposes. This is a positive signal for the banking sector and for overall credit growth.

In short, the central bank is in sync with other central banks to tame the inflation and to maintain financial stability.

He also welcomed the enhancement of limits for individual housing loans from cooperative banks and permitting rural cooperative banks to lend to residential housing segments.

Besides, permitting urban cooperative banks to offer doorstep banking and rural co-operatives to lend to commercial real estate and residential housing will enhance their business and services to the masses.

On the digital payments front, he said the decision to link UPI to Rupay credit cards and enhancing e-mandate of recurring payment from Rs 5,000 to Rs 15,000 will further promote digitalisation.

Atanu Kumar Das, MD & CEO of Bank of India, said the policy announcement reflects the central bank's continued focus on a non-disruptive trade off between price stability and growth in a calibrated manner.

His counterpart at Indian Bank Shanti Lal Jain said the central bank has rightly moved its focus to ensure price stability and expressed hope that ongoing government measures like cutting duty on fuels will help achieve the objective of taming prices. 

More relaxation to cooperative banks will further help in bank credit growth and financial inclusion, he said, adding the thrust on digitisation by enhancing limit of e-mandate on cards, linking of UPI to Rupay credit cards and enhanced subsidy on payment infrastructure development fund will go a long way in achieving these objectives.

He attributed the withdrawal of the accommodative stance in a calibrated manner to the steady and gradual recovery and said the same is supportive to growth while containing inflation.

Citi India chief executive Ashu Khullar said the central bank's decisive and continued commitment to manage prices will help the country weather the global headwinds.

His counterpart at Standard Chartered Bank Zarin Daruwala said, the unanimous vote of the MPC on the policy focus and rate hike is a clear indication of its resolve to rein in inflation.

She also said that linking credit cards to UPI is an ingenious move that is likely to reduce transaction cost and increase acceptability, thereby aiding the government goal of financial inclusion by making consumer credit available to a wider population.

Allowing rural cooperatives to lend to residential housing sector as well as hiking home loan lending limits for all cooperative banks will be a tailwind for affordable housing, she said.

Meanwhile, SBI chief economist Soumyakanti Ghosh said he expects the repo rates to scale to 5.5-5.75 per cent, much above the pre-pandemic level (5.15 per cent) by August as the just announced hike in the minimum support price for kharif crops will increase inflation by 15-20 bps, overshooting the revised RBI projection of 6.7 per cent.

He expects the repo rate to touch 5.25 per cent in the August policy, which will be 10 basis points more than the pre-pandemic level and to 5.5 per cent by October.