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| BS JURY |
| BS Reporter / Mumbai Apr 22, 2009, 00:22 IST |
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 OP Bhatt,
Chairman, State Bank of India
There is no doubt that deft and timely policy measures taken by RBI have cushioned the economy from the ongoing global financial turmoil. Today’s 25 bps cut in rates is in line with its policy to support growth.
There are indications of further easing in lending rates. PLR of five major banks, have fallen from 13 -13.50 per cent to 11-12.50 per cent between November and March. But deposit and lending rates have stayed sticky as banks are saddled with high cost deposits. Even G-Sec yields have been firm due to government borrowings.
Further, with a lower GDP growth and moderation in money supply and inflation at 17 per cent and 4 per cent respectively, it would be a challenge for banks to attain the projected 20 per cent growth in credit, while maintaining credit quality.
 Chanda Kochhar,
MD & CEO-designate, ICICI Bank
The reduction in the repo and reverse repo rates is a welcome move and signals the continuation of a supportive interest rate regime in the economy. RBI has stated that it will manage the government’s borrowing programme in a non-disruptive manner through open market operations and an unwinding of the MSS. It has also put the net supply of fresh government securities of Rs 85,364 crore during the first half of fiscal 2010, in context of the previous years. This will help promote a balanced view in the G-Sec market.
Allowing banks to setup offsite ATMs without prior approval and a review of the existing branch licensing policy for liberalisation would promote financial deepening. Overall, the policy indicates the development of a healthy financial sector and a stable macroeconomic environment.
 Gunit Chadha,
MD & CEO, Deutsche Bank India
There is a continuation of a dovish credit policy. I think it is reflective of the stress in the global external environment and the contraction in GDP of OECD countries. It also acknowledges that the global winds continue to be mixed and the recovery is likely to be tepid, but India should outpace global recovery in growth.
Banks will nudge interest rates down by 25-50 basis points in the next quarter.
I am glad RBI has sought to improve market infrastructure by deciding to route foreign exchange forwards through CCIL (Clearing Corporation of India Limited), with 0 per cent RWA , which reduces inter-bank risk. This may be little-appreciated broadly, but post the Lehman bankruptcy, I think it is a progressive move to reduce systemic risk.
 Sanjay Chandra,
MD, Unitech
The rate cuts have come as a positive surprise. We were not expecting the repo cuts this time. RBI has also mentioned they would like to cut rates further, which again is a positive signal. The growth projection of 6 per cent was on expected lines. RBI has rightly stated that its focus is not on inflation management but on driving growth. We expect the growth-oriented policy to encourage customers to turn more active.
We would have been happy if RBI had cut the CRR as well. While repo rate cuts will bring down the interest rates for our consumers, CRR cuts will improve the liquidity situation. It will encourage banks to lend more to sectors like real estate.
I hope the growth policy will translate into actions in the near future.
 R Seshasayee,
MD, Ashok Leyland
The reduction in rates is lower than what we had expected. However, we appreciate the move as it could translate into better credit flow for the commercial vehicle sector.
The Reserve Bank of India (RBI) should also look into better transmission of credit delivery, which is still very low in the country. In fact, credit is still not available in most parts of the country.
Besides availability, there is also an issue about the right pricing of the loan.
As far as the immediate moves go, it will be very difficult to quantify the direct impact to the automotive sector derived from the 25 basis point short-term lending (repo) and borrowing (reverse repo) rate cuts.
But overall, the moves are quite welcome.
 S Mahalingam,
CFO and Executive Director, TCS
This is a strong signal that the system has enough liquidity and banks now need to lower interest rates and begin lending, instead of parking funds in safe government bonds. This is expected to bring down the cost of borrowing for corporates and individuals alike. Inflation, which is at record low currently, is not RBI’s primary concern.
For the Indian IT sector, which continues to face headwinds in the form of global uncertainties, its larger operational concern in the recent past was the volatile rupee. Now that we are witnessing a net positive FII investment and expect the rupee to strengthen, we look to RBI for intervention to plug any sudden and sharp spikes. Forex volatility impacts earnings visibility and hence needs to be avoided.
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