After three consecutive rate cuts in 2013, the Reserve Bank of India (RBI) lived up to market expectations of a status-quo in its mid-quarter policy review,. With no change in policy rates, bankers now forecast a dip in loan rates in the July-September quarter supported by a good monsoon.
Bankers and economists said RBI’s earlier statement that there is “little room” to cut rates — which RBI governor D Subbarao stated twice in the past — was conspicuous by its absence. In its mid-quarter review, the governor merely said that RBI will have to wait for a durable reduction in inflation before cutting rates.
While the governor has been less hawkish on inflation, a new element introduced in the policy statement has been the exchange rate concerns.
Large public sector banks have been citing high interest rates on small savings schemes as a deterrent to bringing down rates on deposits.
With data showing that GDP grew at sub-5% in Q4, there is a clear need for a pro-growth stance. But as banks pointed out, it was not absence of funds that was holding back investments in core projects but government clearances.
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