Bankers applauded the 50 basis point increase in the repo rate announced by the RBI on Friday, saying the action helps control the dynamics of inflation and GDP at a time of increasing global unpredictability.
A prudent monetary policy, in the opinion of bankers, will assist reduce the dangers of developing volatility in the global economic and financial environment.
Dinesh Khara, chairman of SBI, stated that the monetary policy statement, which followed expectations, is a reminder to remain adaptable and agile in a turbulent international context.
According to A K Goel, chairman of the Indian Banks
Association, the 50 bps repo increase is expected given the changing macroeconomic trends both domestically and globally.
However, he was quick to point out that there is a risk to our external industry, particularly exports, given the headwinds from geopolitical tensions and tightening global financial conditions.
Goel, who is also the managing director of Punjab National Bank, praised the many measures taken to address the system's temporary moderation of excess liquidity, such as the 28-day VRRR auctions with a 14-day VRRR.
In response to the IBA's recent representation, he praised the regulator for agreeing to publish a discussion paper on the expected loss-based strategy for loan loss provisioning by banks.
The proposed discussion paper to transition to an expected credit loss regime for provisioning as well as the alternative framework for securitizing NPAs were both welcomed by the SBI chairman. He claimed that both initiatives would spur the secondary loan market, improve price discovery, and allow banks to make front-loaded provisions.
The rate increase, according to Zarin Daruwala of Standard Chartered Bank India, helps control the dynamics of growth and inflation as the economy deals with increased economic and geopolitical uncertainty and extremely volatile global markets.
She added that relaxing the requirements for allowing regional rural banks to offer online banking to their clients will advance the movement toward digital banking.
According to Surojit Shome, managing director of DBS Bank India, the RBI's gradual removal of its accommodative posture and the 50 bps hike were important steps to limit inflation and manage rising macro risks given the current inflationary headwinds and geopolitical instability.
The RBI's actions, according to Suresh Khatanhar of IDBI Bank, will stabilise the currency and keep prices in check.
The managing director of CSB Bank, Pralay Mondal, believes that the RBI's decision to adopt probability-based loan loss provisions is a wise one. Federal Bank's Venkatraman Venkateswaran said the approach strikes a compromise between growth promotion and inflation control.
(With inputs from PTI)