Kochi, Sep 30 (IANS): Leading industrialists and bankers in Kerala have welcomed the rate hike decision taken by the Reserve Bank of India's Monetary Policy Committee (MPC), as they say these measures are timely and calibrated to address the growing concerns about spiralling inflation while supporting overall economic growth.
The MPC decided to hike the key repo rate (the rate at which the apex bank lend short term money to commercial banks) by 50 basis points to 5.9 per cent, while paring down the economic growth to 7 per cent from its earlier estimate of 7.2 per cent and keeping inflation forecast constant at 6.7 per cent.
Venkatraman Venkateswaran, Group President & CFO of Federal Bank, said that the 50bps increase in the repo rate was in line with the consensus.
"The RBI is confident of India's growth trajectory even as it acknowledged risks from global events. The RBI is also taking steps to address the liquidity deficit, which is believed to be temporary. Government spending is expected to pick-up further in H2, which will also aid in maintaining liquidity. It's a balance between inflation control and supporting growth," he said.
Bankers, however see RBI increasing the repo rate in its next policy meetings in November and January 2023 though the quantum of rate hike depends on the incoming data on inflation front and the major central banks level of tightening.
Murali Ramakrishnan, MD & CEO, South Indian Bank, said the RBI's monetary policy is a well-timed and calibrated one, drawn on expected lines to buffer the current challenges of turmoil in global financial markets that has affected economies worldwide.
"The revision in the repo rate by 50 basis points (5.9 per cent) and SDF to (5.65 per cent) are much needed measures to rope in the concern of inflation. The Indian economy has remained resilient in spite of global headwinds in an environment wherein recessionary fears are mounting and inflation is high. However, the domestic growth, we trust, will continue to show positive trend and will pick up in FY24," he said.
V.P. Nandakumar, MD and CEO of Manappuram Finance, said given the current macro-economic construct, the RBI has done a fine balancing act by intensifying its fight against inflation while not risking economic growth.
"Confronted with multiple challenges stemming from geo-political tensions, major central banks pivoting to more hawkish stance and spiralling inflation, the MPC has served the best policy prescription by raising the repo rate by 50bps to 5.9 per cent while keeping systemic liquidity in surplus mode... Lowering GDP forecast to 7 per cent mirrors a more realistic assessment of economic growth. On the whole, the MPC's decision has been on expected lines in the given macro-economic scenario," he said.
Business captains also see no surprise in the rate hike as they feel it was on the expected lines. Some of them see business actually picking up despite the rate hike driven by increasing festival demand and in the urban centres and a good monsoon driving up rural demand.
K. Paul Thomas, MD and CEO of ESAF Small Finance Bank, said the MPC's decision to hike repo rate was no surprise since it was a done deal after the jumbo hike in US Fed fund'ss rate and a more than expected hawkish tone in Federal Reserve's commentary.
"Going forward, we expect to ride out of the current interest rate cycle by capitalising on higher economic growth of 7 per cent since it will translate into demand expansion in urban centres especially during the forthcoming festive season. Overall, we expect to see business growth to remain buoyant leaving scope for maintaining margins, if not giving scope for further margin expansion as our revenue visibility is improving," he said.