Comment: M D Mallya, CMD, Bank of Baroda

A well-coordinated policy

The policy review has finely addressed a number of pressing concerns like persistently high inflation, formation of a bubble in real estate, financial stability as well as development of market infrastructure. By raising key policy rates for the sixth time since March, but by a modest 25 basis points, RBI has again tried to rein in inflation without disrupting the growth momentum. At the same time, its optimistic assessment of the emerging growth outlook, credit growth momentum and year-end level of headline inflation have smoothened the nerves of several market participants.

RBI’s qualitative measures like increase in risk weights on residential housing loans over Rs 75 lakh to 125 per cent, not allowing banks to increase LTV (loan-to-value) beyond 80 per cent and increase in the standard asset provisioning for teaser loans to two per cent will go a long way in controlling the bubble in residential home prices in metropolitan cities. Other measures concerning financial products like interest rate futures, repos in corporate bonds, credit delivery, financial inclusion efforts and several regulatory and supervisory measures reiterate RBI’s firm commitment to balanced development of financial markets and financial stability.