State Bank of India (SBI) and Indian Banks Association (IBA) Chairman C.S. Setty on Wednesday said the RBI policy statement was an authoritative one towards unveiling of market reforms and moving beyond rate actions.
The move towards a risk-based deposit insurance premium will facilitate significant improvement in the bottom line of sound banks.
“The withdrawal of framework related to specified borrowers and allowing of M&A financing by Indian banks are growth accretive and will foster incremental credit flow from banks,” Setty said in a statement.
Extension of timelines for repatriation from foreign currency accounts of Indian exporters in IFSC and for forex outlay for Merchanting Trade Transactions, besides simplification of reconciliation processes in EDPMS/IDPMS portals, are welcome steps as they will further enhance ease of doing business for the export sector, he further stated.
“The measures towards enhancing customer satisfaction and protection, improved use of rupee across cross-border transactions will strengthen the larger financial ecosystem in terms of acceptability and improved currency outlook over the medium term,” Setty added.
According to the research report from the SBI’s Economic Research Department, the unanimous decision of the Monetary Policy Committee (MPC) to vote for a status quo, keeping the policy rate unchanged, signals a rare kind of dynamism that fans out to areas well beyond the monetary policy, facilitated by comfortable liquidity conditions and benign external sectors despite trade-led uncertainties.
The domestic financial system appears to benefit the most through a slew of forward-looking reforms that aim at global repositioning, it noted.
“We believe both FY26 and FY27 inflation numbers are likely to be much lower. Juxtaposed against the uncertainty plaguing the global financial markets and economies themselves, the choice of MPC of holding rates seems logical from a regulatory angle, per se,” the report highlighted.
However, given that monetary policy communication plays a pivotal role in guiding expectations, the perceived reaction function, and the clarity with which communication is delivered assume utmost importance.
In this context, the RBI has kept the door ajar for future rate cuts with seemingly low inflation forecasts and downward adjustments in growth, though the timing of such could keep everyone guessing, the SBI report noted.
