Despite second RBI action, bankers non-committal to cut rates

Mumbai: Bankers are non-committal on immediately passing on the second successive rate cut by the central bank and the more liquidity easing measures. Though remaining non-committal on immediately lowering their lending rates, bankers on Thursday welcomed specific regulatory measures like deferring a linking of external benchmark on loan and deposit pricing and on statutory liquidity ratio as positives for lenders.

For the second consecutive time, the monetary policy committee voted to cut the benchmark rates by 25 bps to 6 per cent on Thursday. In the February policy review as well the repo rate was slashed by a similar quantum. However, after the governor Shaktikanta Das publicly asking them to do more to pass rate cuts to the borrowers, bankers affirmed their commitment to work on the same.

"The downward revisions in GDP and inflation projections reveal the near-term global headwinds, and lower- than-anticipated rainfall may add to more uncertainties," SBI chairman Rajnish Kumar warned.

Regulatory decisions, which Kumar welcomed, include the decision to categorise additional 2 percent of excess SLR (statutory liquidity ratio) for LCR (liquidity coverage ratio) which will release additional liquidity into the system. It is a "forward-looking policy" which caters to market participants' demands, Kumar added.

Industry lobby Indian Banks Association chairman Sunil Mehta said the latest rate cut on top of a similar move in February, coupled with the moves on easing liquidity will help banks with faster transmission. He further said the lowering of the inflation forecast also provides further comfort.

Mehta, who also leads Punjab National Bank, said the cumulative cut of 0.50 percent "evidently is to push economic growth". House economists at largest private sector lender HDFC Bank said there is room for more rate cuts, but it may not be introduced at the next policy review.

They pointed out to one line in the monetary policy committee resolution on the output gap remaining negative and difficulties faced by the economy which suggests that there can be more rate cuts in the offing.

Kotak Mahindra Bank president for consumer banking Shanti Ekambaram said growth across manufacturing, services and agriculture has moderated, while food inflation continues to be benign which suggests interest rates are "likely to be stable with a downward bias".

State-run Bank of India's Dinabandhu Mohapatra and SBI's Kumar also welcomed the proposal to set up a task force on the development of secondary market for corporate loans. B Prasanna, who heads the global markets group at ICICI Bank, said the policy is "prudent" and projected there being more room for the MPC to support growth if required. Foreign lender Standard Chartered Bank India chief executive Zarin Daruwala said the rate cut and the moves on liquidity will "aid" monetary transmission.

The vice-chairman of the second largest mortgage lender Indiabulls Housing Finance, Gagan Banga, said the rate cut will cheer the housing sector, both on the supply and the demand side.

The pick-up in the sector will accelerate especially as it comes on the back of GST rationalisation. He also welcomed the RBI proposal to develop housing finance securitisation market, saying the move will lead to better management of asset-liability and liquidity in the sector.

Non-banking lender Tata Capital's Rajiv Sabharwal opined that the central bank RBI will pause from here on and will await global growth cues and the impact of monsoons before any further intervention.