Comments by Mr. V. Vaidyanathan, Chairman and Managing Director, Capital First, on
the RBI’s credit policy on 20thSeptember 2013.
We are not surprised that the RBI raises repo rates by say 25
bps. They have simultaneously reduced MSF by 75 bps. The
expectation on MSF reduction was a big more than 75 bps, but
the increase in Repo is expected, as this establishes that the RBI
means to be tough on inflation, at the same time would like to
release funds for productive lending. The short term interest
rates in CPs and CDs had spike by 200 to 250 bps, and the
decision to reduce MSF by 75 bps and the CRR change to 95%
will definitely cool short term rates.
The August Inflation numbers at 6.1% as compared to 5.79% in
July 2013. We expect inflation to come down in the coming few
months based on good monsoons. Moreover, and as and when
the government introduces newer fiscal measures it will give the
RBI headroom to reduce rates later.
Since customers are habituated to invest in Bank’s fixed deposit
and find it more convenient, raising interest rates could even be more effective than Inflation indexed
Bonds to improve savings rates in the country.
One of the matters to be addressed is the high SLR rate in India. We are hoping that the RBI reduces
SLR over time, to release funds for lending purposes in the Indian economy, this may form a part of the
reform agenda over time.
the RBI’s credit policy on 20thSeptember 2013.
We are not surprised that the RBI raises repo rates by say 25
bps. They have simultaneously reduced MSF by 75 bps. The
expectation on MSF reduction was a big more than 75 bps, but
the increase in Repo is expected, as this establishes that the RBI
means to be tough on inflation, at the same time would like to
release funds for productive lending. The short term interest
rates in CPs and CDs had spike by 200 to 250 bps, and the
decision to reduce MSF by 75 bps and the CRR change to 95%
will definitely cool short term rates.
The August Inflation numbers at 6.1% as compared to 5.79% in
July 2013. We expect inflation to come down in the coming few
months based on good monsoons. Moreover, and as and when
the government introduces newer fiscal measures it will give the
RBI headroom to reduce rates later.
Since customers are habituated to invest in Bank’s fixed deposit
and find it more convenient, raising interest rates could even be more effective than Inflation indexed
Bonds to improve savings rates in the country.
One of the matters to be addressed is the high SLR rate in India. We are hoping that the RBI reduces
SLR over time, to release funds for lending purposes in the Indian economy, this may form a part of the
reform agenda over time.