RBI rate hike to manage growth inflation dynamics

Bankers welcomed the 50 bps hike in the repo rate by RBI on Friday, saying the move helps manage the growth and inflation dynamics as such a gradualistic approach is welcome amid rising global uncertainty. Bankers are of the view that a cautious monetary policy will help better address the risks of rising instability in the global economic and financial environment.

SBI Chairman Dinesh Khara opined that the monetary policy statement, which was on expected lines, is a nudge to stay nimble and agile in a volatile global environment.

Considering the evolving macroeconomic developments domestically and across the globe, the 50 bps repo hike is on expected lines, said A K Goel, chairman of the Indian Banks Association.

He, however, was quick to note that considering the headwinds from the geopolitical tensions and tightening of the global financial conditions, there is risk to our external sector, especially exports.

Goel, who is also the managing director of Punjab National Bank, welcomed the various measures like the 28-day variable rate repo auctions (VRRR) with 14-day VRRR to tide over temporary moderation in surplus liquidity in the system.

He thanked the regulator for agreeing to release a discussion paper on expected loss based approach for loan loss provisioning by banks, in response to IBA’s recent representation.