It’s a mo­men­tous change on the liq­uid­ity front & RBI was re­spon­sive to it

The Economic Times - - Commodities Plus -

RBI has de­liv­ered a rate cut. How does it af­fect lend­ing rates?

Once liq­uid­ity eases there will be some trans­mis­sion for bor­row­ers. This al­lows the liq­uid­ity frame­work to be an im­por­tant ad­junct to the mone­tary pol­icy stance. We could ex­pect one or two more rate cuts for the rest of the year but it’s hard to say be­cause there are vari­ables like mon­soon, food prices, in­fla­tion and ex­ter­nal fac­tors like the US Fed’s stance. But the sense we have is that we are in an ac­com­moda­tive stance. It’s a mo­men­tous change on the liq­uid­ity front and RBI has been re­spon­sive to it.

There are many new liq­uid­ity mea­sures in this pol­icy? How cru­cial will they be?

Liq­uid­ity is cru­cial be­cause we have a deficit of .₹ 1,50,000 crore. Once gov­ern­ment spend­ing starts, we will see eas­ing in liq­uid­ity which should take a cou­ple of months. The gov­ern­ment has .₹ 1,00,000 crore of bal­ances with RBI. Ear­lier trends show that from April we’ll see some spend­ing.

What are the big fac­tors to watch out for this fis­cal?

One thing which I would keep an eye on is the cap­i­tal situation of banks, the March-end im­pair­ment num­ber and the whole im­pact of liq­uid­ity eas­ing. We should also watch out for how the pay­ment banks get their act to­gether this year. A lot of banks have given a sense on where their num­bers are but it could be in ex­cess of the guid­ance which may have dif­fer­ent im­pli­ca­tions on the cap­i­tal re­quire­ments es­pe­cially for pub­lic sec­tor banks.

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