Bankers welcome RBI Governor's dovish policy tone

Leading bankers have welcomed the Reserve Bank's accommodative policy stance and expressed the hope that RBI's caution on inflation front is whittled by a good monsoon.
Terming the policy outcome as expected, State Bank of India Chairperson Arundhati Bhattacharya said, "the tone of the policy is fairly balanced, pragmatic and continues to reflect accommodative cycle.
"Inflation trajectory seems broadly in line with RBI prognosis, though we are fairly hopeful of inflation possibly undershooting the 5 per cent target set for March 2017," the SBI chief said.
Her peer from private sector ICICI Bank Chanda Kochhar said the continued commitment to an accommodative policy stance and the assurance of moving towards a neutral liquidity framework is positive, which should continue to support transmission of the RBI's policy stance.

"The reassurance that the RBI stands ready to mitigate any financial volatility resulting out of FCNR deposit maturities due later this year is very welcome. Overall, macroeconomic conditions are conducive for an improving growth trajectory as the various policy measures announced by the Government take effect."
Melwyn Rego of Bank of India welcomed the RBI measures to address the liquidity deficit in the system by promising to progressively lower the average ex-ante from 1 per cent of NDTL to a position closer to neutrality.

"The move will help in quicker transmission of monetary policy initiatives, with MCLR framework in place, which will lend support to growth. It is comforting to note that liquidity is expected to be stable during the period of outflow of FCNR deposits," Rego said.

Mid-sized private lender Yes Bank's Rana Kapoor expressed hope that with a food monsoon, RBI's cautious stance on inflation would give way to accommodative actions in August.
Abheek Barua, chief economist at HDFC Bank, termed the policy move on expected lines and attributed this stance to firming commodity prices, ambiguity related to the implementation of the Seventh Pay Commission recommendations and uptick in inflation expectations driven by the upside surprise in the CPI reading in April.
On the cautious stance on inflation, Barua said although there are marginal upside risks to the inflation target of 5 per cent "we believe the structural movement is towards a low-inflation economy.

"We still see the possibility of another 25 bps cut in the policy rate this fiscal provided the monsoon is normal and evenly distributed, commodity prices do not rise substantially and the global environment is benign," Barua said.