Indian banks prefer to play a waiting game

Though Indian bankers have welcomed the cut in the policy rate by the Reserve Bank of India, retail lending rates are unlikely to see a reduction anytime soon. Banks, it appears, will wait a while, and watch how things pan out in the coming days before taking a call on cutting retail lending rates.

Nevertheless, they have hailed the RBI’s action in reducing the policy rate. “The reduction in repo rates by 25 basis points is a welcome move, and indicates continued focus on growth. At the same time, RBI’s commitment towards maintaining adequate liquidity in the system is important in the context of continued smooth functioning of markets,” said Chanda Kochhar, Managing Director and CEO, ICICI Bank. The RBI’s policy actions, together with the measures taken by the government on the fiscal and investment fronts, according to her, “indicate continued overall policy support for a revival in economic growth.”

HS. Upendra Kamath, Chairman and Managing Director, Vijaya Bank, said he was “a bit disappointed” that the central bank did not cut the cash reserve ratio (CRR). Mr. Kamath pointed out that banks had borrowed Rs.1.30 lakh crore under the Liquidity Adjustment Facility (LAF) last week, which, he said, was “way above the comfort level of the RBI.” Referring to the “liquidity stress” in the financial system, he said, “I am slightly disappointed, but may be the RBI may inject more liquidity via open market operations,” he said.