BS Jury

ARUNDHATI BHATTACHARYA
Chairperson, State Bank of India

The central bank's response to the evolving macro and monetary conditions is balanced and well-reasoned. Domestic factors - inflation and savings - have been accorded high weightage. It is encouraging to see the growth projection for FY14 being pegged at five per cent, based on buoyancy in investment activity towards the end of this financial year. The increase in the repo rate and restoration of symmetric interest rate corridor are on expected lines, the latter prompted by the return of some normalcy in external sector. The increase in limit under term repo window by 25 basis points is a positive, as this will ease liquidity.

On development and regulatory policies, RBI has laid down clear emphasis on new operating framework, strengthening of banking and financial markets, financial inclusion and asset quality on banking books. The near-term road map lays considerable emphasis on financial stability and exploitation of technology.

CHANDA KOCHHAR
MD & CEO, ICICI Bank

The monetary policy statement reflects RBI's continued move towards normalising policy operations and rolling back the measures announced to manage short-term volatility in the exchange rate. The increase in the liquidity available through the liquidity adjustment facility window and the reduction in the MSF (marginal standing facility) rate would ensure stability in money markets. At the same time, the increase in the repo rate was along expected lines, given the recent trends in inflation. RBI has also continued to work towards strengthening and deepening the country's financial markets. Permitting banks to provide credit enhancements for corporate bonds is a step forward in this regard. With this policy statement, RBI has brought the policy focus back to balancing the growth-inflation dynamics. Going forward, we need to continue to focus on ways to step up growth closer to our country's potential and take measures to address the supply-side causes of inflation.

PRAMIT JHAVERI
Chief Executive Officer, Citibank India

RBI has reverted to a normalised policy framework, narrowing the gap between repo and MSF rates, while continuing to focus on inflation. It is forecasting inflation to remain elevated, even as it expects growth to rise to five per cent in FY14. If inflation does not recede in the coming months, further rate hikes could follow.

The RBI governor stated global growth conditions appeared to have improved and delay in Fed tapering had calmed markets. We hope this is not the proverbial calm before the storm. With capital and current account inflows being targeted, buoyancy in exports and controlled gold imports are welcome. None of these can substitute for a better domestic growth outlook via a revival in stalled projects and a significant improvement in the overall investment and consumption climate. Last, we await the fine print on wholly-owned subsidiary norms, though we are disappointed RBI is not considering the 'dual model'.

YM DEOSTHALEE
Chairman & Managing Director, L&T Finance

The current uncertainty, suffused with bouts of volatility, has seen a steady customer holding fort in RBI.

This policy has managed expectations well towards ensuring stability by balancing short-term objectives with long-term goals as reflected in the normalisation of exceptional liquidity measures. The increase in the availability of 7/14-day term repo will provide much-needed liquidity.

However, I expect the gruelling food and fuel inflation to continue into the second half. Despite an encouraging monsoon, growth looks difficult due to the vacuum left by the infrastructure and industrial sectors. Private consumption growth, too, has seen sharp deceleration and investment growth is slowing, while government spending may be constrained. Given the dynamic circumstances, one has to be cautious. While current account deficit risks have moderated, we need to remain vigilant for unwarranted situations.

RAJEEV TALWAR
Executive Director, DLF

RBI's analysis continues to be the same and it is wrong. You can be either happy, thinking we have taken certain direction and we are not worried about growth. Or, you can think we had taken a wrong direction three years ago and would adopt a strategy to reverse that. One SBI chairman introduced teaser loans and recorded the best growth in its safest loans. The next chairman, Pratip Chaudhuri, kept asking for lower rates but nothing changed and he retired. RBI did not listen to them. Sales of white goods are down and banks have had to announce lower rates on consumer durables and automobiles.There is a case to lower rates, given the good monsoon and a good crop. The prime minister should sit with the finance, agriculture and urban development ministers and the RBI governor to formulate suitable fiscal and monetary policies to achieve a higher growth rate. Because, on that depends the employment of the younger generation.

KEKI MISTRY
Vice-Chairman and Chief Executive Officer, HDFC

The monetary policy announcement brings no surprises, as the RBI governor has delivered in line with market expectations. The increase in the repo rate was expected, as large dollar inflows under the swap facility, mainly from ongoing foreign currency non-resident (bank) deposits, would increase liquidity and be inflationary in the future. The reduction in the marginal standing facility marks the third and final phase of unwinding of the exceptional measures undertaken in July. While some softening of interest rates on the shorter end has already happened, one does not expect Tuesday's measures to significantly change interest rates in the immediate period. There is a need for a more effective yield curve, where short-term rates are considerably lower than longer-term ones.

As extraneous factors have contributed to poor asset quality, RBI is being responsive by revisiting the restructuring guidelines for all financial players.