The status quo adopted by the Reserve Bank on Monday disappointed bankers as they were expecting rate cuts, but found takers in economists who hailed the move as a prudent step given the inflationary pressures and lack of any credible fiscal measures.
"We were overwhelmed by the current need for growth revival. We were slightly over optimistic, but the Reserve Bank has taken a very balanced view because it analyses data from the macro-level," Indian Overseas Bank Chairman and Managing Director M Narendra told PTI.
"It is clear that for the RBI, inflation is still the primary concern. They feel that controlling inflation is more important than pushing growth and we can see a rate cut only in the event of a reduction in inflation," Andhra Bank Chairman and Managing Director B A Prabhakar said.
However, economists heaped praise on the RBI for not giving into the widespread calls for cutting rates.
"This is a very objective policy and it was good to note that the RBI has not leaned to market pressures on reduction of policy interest rates," Kotak Bank Chief Economist Indranil Pan said.
Federal Bank Managing Director and Chief Executive Shyam Srinivasan said the RBI has made a tough call by focusing on inflation and signaling that supply side issues should be addressed by the Government. However, he expected some positive indications from the July policy as by that time RBI will have clearer picture on the domestic growth issues as well as the Eurozone crisis. Moreover, the easing commodity prices should help it in formulating its policy.
On if the export credit enhancement will have any tangible impact, Srinivasan said: "Not immediately but maybe over the next three to four months. But the statement that it will continue to hold more OMOs (Open Market Operations) is a welcome measure."
Kotak Mahindra Bank Consumer Banking President K V S Manian termed the RBI stance as a "severe disappointment" and said the apex bank has sent a strong signal in asserting its independence by putting the ball onto the fiscal and government-related side. "Delhi and Mumbai are two horses that pull this economy 'carriage'. The Delhi (seat of govt) horse cannot transfer all burden to the Mumbai (RBI HQ) horse," he said.