The RBI’s emphasis on customer protection and compliance aligns well with leading lenders’ commitment to responsible credit lending practices
Sarvjit Singh Samra, MD & CEO, Capital Small Finance Bank
Venkatraman Venkateswaran - Group President & CFO, Federal Bank
George Alexander Muthoot, MD, Muthoot Finance
Rajesh Sharma, Managing Director at Capri Global Capital
FinTech BizNews Service
Mumbai, 9 October, 2024: RBI maintained the Repo rate at same levels and changed the stance to Neutral, which was largely in line with consensus. Here are views of leading lenders on MPC decisions:
Challa Sreenivasulu Setty, Chairman, SBI:
“The RBI policy statement is a clear recognition of robust growth and an inflation trajectory that is trending down. The shift in stance to neutral is an affirmative front loaded policy move that will ensure RBI remains nimble footed to align inflation with the 4% target. The enhancement of limits under UPI is a testimony to the continuous innovation in India’s digital infrastructure. The creation of RBI climate risk information system will standardise datasets related to climate and bring them at one platform. This repository will also help the regulated entities to fine tune their transition risk assessment models.”
Rajesh Sharma, Managing Director at Capri Global Capital:
As widely expected, the Reserve Bank of India (RBI) has kept the repo rate unchanged at 6.5% for the seventh consecutive time. This strategy highlights the RBI's priority to balance growth with inflation control, acknowledging the significant weight of volatile food components in India's retail inflation basket and the potential impact of global oil price fluctuations. While there was some anticipation of rate cuts by the end of 2024, the RBI seems inclined to adopt a wait-and-see approach before initiating a rate cut cycle. Moreover, the introduction of UPI-based Cash Deposits and the issuance of Central Bank Digital Currency (CBDC) for Non-Bank entities represent significant advancements. UPI-based Cash Deposits streamline the cash deposit process, enhancing transaction convenience and efficiency. The CBDC for Non-Bank entities extends access to digital currency beyond traditional banks, fostering financial inclusion and innovation. These initiatives underscore the RBI's proactive approach to enhance the financial ecosystem and support economic growth, reflecting a positive direction for the industry.
Mandar Pitale, Head Treasury, SBM Bank India:
"The Monetary Policy Committee (MPC) has changed the stance to neutral deriving comfort from well poised Growth Inflation equilibrium. There is a hawkish undertone to policy verdict in terms of persistent focus on tight vigilance on the near-term trajectory of the inflation to safeguard against systemic risks to inflation outlook. The sustained momentum in Domestic growth, with private consumption and investment growing in tandem are instrumental in providing space to MPC to focus on inflation, ensuring its durable descent to the 4 per cent target amidst expectation of near-term spikes.
While the Growing divergence in inflation-growth dynamics across countries will result in varying monetary policy responses going ahead, MPC is expected to remain unambiguously focused on a durable alignment of inflation with the target. The decision of change of stance to neutral will impart enough flexibility to MPC to act on policy rates in near future if inflation moderates on durable basis on expected lines."
Viram Shah, CEO, Vested Finance:
“The Reserve Bank of India (RBI) has hinted at potential rate cuts with its change in stance to 'neutral' from 'withdrawal of accommodation'. This subtle shift signals the central bank's readiness to ease monetary policy if inflation continues its downward trajectory.
We can expect rate cuts in December 2024 or February 2025, provided inflation consistently stays around 4.5%. The move aligns the RBI with global central bank trends, balancing growth support with inflation control. However, three key risks could derail this trajectory: volatile food inflation, geopolitical tensions in the middle east which impacts oil prices, and a potential resurgence in core inflation. The Iran-Israel conflict threatens to drive up crude oil prices, a critical concern given India's 8% import dependency for oil. The RBI must navigate these challenges while addressing pressure to stimulate an economy operating below potential.
While inflation risks are evident, the RBI is under pressure to support growth, especially with the US Federal Reserve having already cut rates by 50 basis points. As the December meeting approaches, September and October inflation data will be crucial. If inflation adheres to projections without surprises, a rate cut could materialize.”
George Alexander Muthoot, MD, Muthoot Finance
“We commend the RBI’s prudent decision to maintain policy rates at 6.5% while adopting a neutral stance, providing essential flexibility to address inflationary pressures without hampering growth. This balanced approach allows the financial sector to respond effectively to evolving economic conditions. Despite global challenges, the Indian economy has demonstrated remarkable resilience, and it’s encouraging to see a revival in investment activities. Additionally, rural demand is on the rise, driven by favorable agricultural activities, which fuels our optimism for sustained growth. As we approach the festive and wedding season, we anticipate further uptick in both urban and rural demand, creating a positive environment for gold loans.
We are pleased to see the RBI Monetary Policy Committee’s confidence in the strong health parameters of the Indian financial ecosystem, including banks and NBFCs. As a responsible gold-loan NBFC, we recognize the importance of maintaining this stability and are committed to safeguarding customer interests. The RBI’s emphasis on customer protection and compliance aligns well with our commitment to responsible credit lending practices. Muthoot Finance remains dedicated to maintaining a robust risk management framework and enhancing operational resilience to navigate complexities.
We also welcome the RBI’s continued efforts to strengthen the digital arm of the financial ecosystem, particularly through the enhancement of UPI transaction limit. This initiative further reinforces India’s position as a leader in digital payments, encouraging wider adoption of UPI, and fostering greater financial inclusion. In alignment to offer more convenience to our customers and target the digital-savvy audience, Muthoot Finance had recently partnered with Google Pay to revolutionize gold loans.”
Sarvjit Singh Samra, MD & CEO, Capital Small Finance Bank:
"The biggest takeaway of Reserve Bank of India's new-look MPC has been the change of stance from 'withdrawal of accommodation' to 'neutral' while maintaining status quo in the Policy Rates. The clear shift in stance to 'focussed on the durable alignment of inflation to target while supporting growth' is a decisive step and a landmark communication indicating peaking out of Interest Rate Cycle.
With Festival season round the corner, we welcome the RBI's foresighted move which shall augment economic activity and credit growth. With Indian Economy on the rise, further boost from RBI, we believe banks are in sweet spot to cater to customers diverse needs and partner in their growth. We foresee healthy environment for banking and overall economy with great opportunities for a well diversified retail franchisee like us to make the most of it."
Venkatraman Venkateswaran - Group President & CFO, Federal Bank
The balance between growth and inflation is well poised and was the cue for stance change. RBI maintained the GDP growth at 7.2% and reiterated the focus to tame inflation, largely Food inflation.
Few measures to further ease impact on customers was announced re: foreclosure charges and increase in per transaction limit for UPI / UPI Lite wallet is a welcome move.
Barring any major upheaval in geo-politics and other external factors, we may see the first action on Repo rate in Dec MPC meeting. Near term data points will form the basis for rate cut.
