RBI Monetary Policy: A Boost to Ease of Doing Business and Economic Growth
The Reserve Bank of India (RBI) has announced its latest Monetary Policy, keeping the repo rate unchanged at 5.5%. While the decision on the repo rate was widely anticipated, the policy has gone beyond just the interest rates, with a strong focus on ease of doing business and growth.
Industry Reaction: A Welcoming Note
Industry veterans such as Keki Mistry, Dinesh Khara, and Lalit Tyagi have welcomed the policy, citing its potential to boost the Indian economy. Keki Mistry, former vice-chairman and CEO of HDFC, called the policy ‘very good’, highlighting the downward revision of inflation projections to 2.6% and the upward revision of growth estimates.
‘It’s very positive. The rural economy is doing well, and GDP numbers are rising. A combination of rural doing well and GST rate cuts will facilitate growth,’ Mistry said. He also expects the RBI to cut rates in the next policy meet in December, citing the need to wait for global cues.
Ease of Doing Business: A Key Focus Area
The RBI’s focus on ease of doing business is a key aspect of the policy. The central bank has announced several measures to improve the business environment, including the segregation of roles between banks and their subsidiaries. Mistry welcomed this move, calling it ‘a big concern’ that has now been addressed.
The RBI has also proposed risk-based deposit insurance premiums, which is expected to bring down the cost of deposits. This move is likely to give a boost to the credit cycle, according to Lalit Tyagi, executive director of Bank of Baroda.
Growth Estimates: An Upward Revision
The RBI has revised its growth estimates upward, citing the improvement in the rural economy and the potential impact of GST rate cuts. This is a positive sign for the Indian economy, which has been facing challenges in recent times.
Former SBI chairman Dinesh Khara also reacted to the policy, calling it ‘pro-industry’. ‘Making infrastructure financing cheaper, supporting Indian exporters, and internationalisation of rupee will go a long way to support the Indian economy,’ he said.
Challenges Ahead: Transmission of Monetary Policy
Despite the positive news, there are challenges ahead for the Indian economy. The RBI has expressed frustration over the slow transmission of monetary policy, particularly after cutting rates by 100 basis points. Khara noted that banks are facing challenges in terms of the cost of deposits, which is affecting their ability to lend.
‘We have to be mindful of banks, the cost of deposit are a challenge as banks are competing with other market instruments. They are doing cost optimisation to maintain their NIMs and pay more to depositors. Banks are looking for the right opportunities for lending,’ he said.
Conclusion: A Positive Step Forward
The RBI’s latest Monetary Policy is a positive step forward for the Indian economy. The focus on ease of doing business and growth is likely to have a positive impact on the economy, particularly in the rural sector. While there are challenges ahead, the policy has been welcomed by industry leaders, who see it as a boost to the economy.
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