RBI downplays Moody's downgrading

Moody's downgraded SBI, citing reliance on a fiscally constrained government to maintain adequate capital

K C Chakrabarty, deputy governor of the Reserve Bank of India (RBI), on Monday sought to downplay Moody’s downgrading of State Bank of India, saying it’s not worrying.

Speaking to reporters on the sidelines of a meeting hosted by Vijaya Bank in Bangalore, Chakrabarty said that banks are free to increase rates and that RBI is neutral on interest rate. He added RBI can assess impact on credit growth, asset quality only after knowing the quantum of rate hike and the asset quality is not always a function of interest rate.

Chakraborty’s statement comes just days after the central bank raised the key repo rate (the rate at which it lends to banks) by 25 basis points from 7.25 per cent to 7.5 per cent.