 "BS Jury")
Arundhati Bhattacharya
Chairman, State Bank of India
Largely, the monetary policy announcement of keeping the repo rate unchanged was in consonance with the market consensus. Nevertheless, the central bank has sounded a point of caution - the inflation trajectory might still be subject to an upside risk, guided by domestic factors such as a less-than-normal monsoon and the electoral cycle, while external factors such as a build-up of corporate leverage in emerging market economies and geopolitical risks in others might play spoilsport. The decision to increase borrowings under the term repo window to 0.75 per cent of NDTL (net demand and time liabilities) is in line with RBI's attempt to bring about a market-based benchmark for pricing various financial products. RBI has refrained from giving a forecast on M3, deposit and credit for FY15.
Other policy updates such as extension of the deadline to implement Basel-III norms, revised guidelines under the Foreign Exchange Management Act and allowing portfolio investors to hedge coupon receipts are steps in the right direction.
MD & CEO, ICICI Bank
The monetary policy statement is commendable for the clarity with which objectives have been articulated; the pragmatism in new measures; and the continuity of approach across monetary policy, regulation, and financial inclusion.
While reiterating the Reserve Bank of India (RBI)'s focus on containing inflation at the targets set by the Urjit Patel committee, RBI has stated transient effects should be considered, thereby addressing concerns of undue volatility in rates. The decision to hold rates was widely expected. The shift from overnight liquidity provision to term repos is also in line with RBI's recent approach.
The impact of implementing global regulations in India and regulations specific to the country, and the challenges that emerge will have to be monitored.
RBI's approach to developing the sector incorporates more players and deeper financial markets. The regulations will have to consider the potential regulatory arbitrage.
Vice-chairman & CEO, HDFC Ltd
There was consensus the RBI would hold rates in its first monetary policy of FY15. The central bank must be credited for better liquidity management. Typically, liquidity tends to tighten in March every year, owing to a pick-up in credit and advance tax payouts. However, by conducting regular term repos and providing enhanced access to the marginal standing facility, there was no build-up in liquidity pressure. RBI has categorically stated its intention to reduce access to overnight repos in favour of term repos, as it believes this will enable better transmission of monetary policy.
The economy is on a stronger footing, with reduced inflation, increased forex reserves and lower fiscal and current account deficits. Assuming no adverse weather conditions or extreme spikes in global oil prices, there is scope for reduction in rates in the latter half of FY15.
MD, Regional Head of Research, South Asia Global Research, Standard Chartered Bank
RBI has kept the policy rates unchanged, in line with expectations. But it maintained a cautious stance, amid the looming uncertainty on inflation. It is likely to have more clarity on weather and election-related uncertainties at its June policy meeting, which will allow it to make a more informed decision. RBI also said it would ignore the base effect-driven decline in (CPI) Consumer Price Index-based inflation likely through the June-November period. We believe the following conditions have to be met for RBI to consider monetary easing: (I) headline CPI must remain below seven per cent for a considerable period (more than three months); and (II) core CPI inflation has to fall to about seven per cent. On the other hand, the risk of a rate rise will emerge if negative supply-side shocks permanently raise the inflation trajectory.
In our baseline scenario, we think policy rates could remain stable for a longish period, as changes in the CPI might not be large enough to nudge the rates in either direction.
Regional chief executive (India & South Asia), Standard Chartered Bank
RBI has been guiding the market well. Therefore, keeping the rates unchanged in this policy announcement was in line with expectations.
Inflation, however, continues to be a big unknown and the focus on managing inflation remains vital, especially amid weather-related uncertainties and sticky core Consumer Price Index (CPI)-based inflation. This also justifies RBI's cautious stance on the CPI inflation trajectory and, therefore, on policy rates. With election-related uncertainty behind us in the second half of the year more clarity on the inflation trajectory, RBI will be better positioned to revisit its rate stance then. A strong rally in the rupee is a positive for inflation and demonstrates positive expectations, both on the economic and political fronts.
Among emerging markets, India has been a disproportionate beneficiary in attracting inflows. Here, too, we have downside risks if outcomes fall short of expectations.
Executive director, DLF
RBI has left policy rates unchanged. He (RBI Governor Raghuram Rajan) is making politically correct moves, though these might not be the best, in terms of the economy.
I think he is leaving it to the new government to take action on the fiscal front first. He has given many reasons for not reducing rates. His words offer hope should the CPI retain its downward march, the central bank will be unlikely to increase rates. But this will not spur growth, except in the event of a more proactive government in the future.
The governor is right that there hasn't been a revival in manufacturing. Therefore, he could have taken some measure to boost growth. I think he does not want to side with those favouring growth, as elections are round the corner.
Chairman, State Bank of India
Largely, the monetary policy announcement of keeping the repo rate unchanged was in consonance with the market consensus. Nevertheless, the central bank has sounded a point of caution - the inflation trajectory might still be subject to an upside risk, guided by domestic factors such as a less-than-normal monsoon and the electoral cycle, while external factors such as a build-up of corporate leverage in emerging market economies and geopolitical risks in others might play spoilsport. The decision to increase borrowings under the term repo window to 0.75 per cent of NDTL (net demand and time liabilities) is in line with RBI's attempt to bring about a market-based benchmark for pricing various financial products. RBI has refrained from giving a forecast on M3, deposit and credit for FY15.
Other policy updates such as extension of the deadline to implement Basel-III norms, revised guidelines under the Foreign Exchange Management Act and allowing portfolio investors to hedge coupon receipts are steps in the right direction.
MD & CEO, ICICI Bank
The monetary policy statement is commendable for the clarity with which objectives have been articulated; the pragmatism in new measures; and the continuity of approach across monetary policy, regulation, and financial inclusion.
While reiterating the Reserve Bank of India (RBI)'s focus on containing inflation at the targets set by the Urjit Patel committee, RBI has stated transient effects should be considered, thereby addressing concerns of undue volatility in rates. The decision to hold rates was widely expected. The shift from overnight liquidity provision to term repos is also in line with RBI's recent approach.
The impact of implementing global regulations in India and regulations specific to the country, and the challenges that emerge will have to be monitored.
RBI's approach to developing the sector incorporates more players and deeper financial markets. The regulations will have to consider the potential regulatory arbitrage.
Vice-chairman & CEO, HDFC Ltd
There was consensus the RBI would hold rates in its first monetary policy of FY15. The central bank must be credited for better liquidity management. Typically, liquidity tends to tighten in March every year, owing to a pick-up in credit and advance tax payouts. However, by conducting regular term repos and providing enhanced access to the marginal standing facility, there was no build-up in liquidity pressure. RBI has categorically stated its intention to reduce access to overnight repos in favour of term repos, as it believes this will enable better transmission of monetary policy.
The economy is on a stronger footing, with reduced inflation, increased forex reserves and lower fiscal and current account deficits. Assuming no adverse weather conditions or extreme spikes in global oil prices, there is scope for reduction in rates in the latter half of FY15.
MD, Regional Head of Research, South Asia Global Research, Standard Chartered Bank
RBI has kept the policy rates unchanged, in line with expectations. But it maintained a cautious stance, amid the looming uncertainty on inflation. It is likely to have more clarity on weather and election-related uncertainties at its June policy meeting, which will allow it to make a more informed decision. RBI also said it would ignore the base effect-driven decline in (CPI) Consumer Price Index-based inflation likely through the June-November period. We believe the following conditions have to be met for RBI to consider monetary easing: (I) headline CPI must remain below seven per cent for a considerable period (more than three months); and (II) core CPI inflation has to fall to about seven per cent. On the other hand, the risk of a rate rise will emerge if negative supply-side shocks permanently raise the inflation trajectory.
In our baseline scenario, we think policy rates could remain stable for a longish period, as changes in the CPI might not be large enough to nudge the rates in either direction.
Regional chief executive (India & South Asia), Standard Chartered Bank
RBI has been guiding the market well. Therefore, keeping the rates unchanged in this policy announcement was in line with expectations.
Inflation, however, continues to be a big unknown and the focus on managing inflation remains vital, especially amid weather-related uncertainties and sticky core Consumer Price Index (CPI)-based inflation. This also justifies RBI's cautious stance on the CPI inflation trajectory and, therefore, on policy rates. With election-related uncertainty behind us in the second half of the year more clarity on the inflation trajectory, RBI will be better positioned to revisit its rate stance then. A strong rally in the rupee is a positive for inflation and demonstrates positive expectations, both on the economic and political fronts.
Among emerging markets, India has been a disproportionate beneficiary in attracting inflows. Here, too, we have downside risks if outcomes fall short of expectations.
Executive director, DLF
RBI has left policy rates unchanged. He (RBI Governor Raghuram Rajan) is making politically correct moves, though these might not be the best, in terms of the economy.
I think he is leaving it to the new government to take action on the fiscal front first. He has given many reasons for not reducing rates. His words offer hope should the CPI retain its downward march, the central bank will be unlikely to increase rates. But this will not spur growth, except in the event of a more proactive government in the future.
The governor is right that there hasn't been a revival in manufacturing. Therefore, he could have taken some measure to boost growth. I think he does not want to side with those favouring growth, as elections are round the corner.