WILL NOT LET ANY COOPERATIVE BANK COLLAPSE, SAYS RBI GOVERNOR
Welcoming the 25 basis points rate cutfifth in a row and to a decadal low of 5.15 per cent on Friday, bankers are expecting 25-40 bps more reduction through the course of the fiscal year, given the Reserve Bank of India (RBI) focus on growth that has been sagging for months now.
HDFC Bank Chief Economist and Executive Vice-president Abheek Barua said though the latest rate cut was on expected lines, the market was disappointed as they were expecting a larger cut.
Of the six-member rate-setting monetary policy committee, five members voted for a 25 bps cut while one by 40 bps, the RBI said.
“The 25 bps rate cut coupled with an explicit policy acknowledgement of further rate cuts would ensure that fiscal and monetary policy work in tandem in arresting growth concerns,” State Bank of India Chairman Rajnish Kumar said.
Barua said while markets were somewhat disappointed, as they were expecting a larger cut, the latest cut needs to be seen cumulatively with the 110 bps reduction so far this year-taking the cumulative cut to 135 bps since February.
Recognising the weak growth outlook, the RBI sharply lowered its GDP estimate to 6.1 per cent in FY20 from 6.9 per cent previously.
The RBI clearly signalled its continued focus to revive growth, implying that more rate cuts are in the offing.
“We expect 25-40 bps more cuts in this fiscal,” Barua said, adding that the RBI is also likely to keep liquidity conditions in surplus in the remaining part of the year.
Stanchart chief executive Zarin Daruwala said the RBI reaffirmed its strong commitment to growth with the latest reduction and continuing with its accommodative stance.
“The cumulative reduction of 135 bps so far in 2019, along with the recent cut in corporate tax should help revive growth in the coming months,” she said.
The newly-appointed managing director of Punjab National Bank Mallikarjuna Rao said the RBI has continued with an accommodative stance, suggesting possibility of further rate reductions.