ICRA Comments On RBI's Second Bi-monthly Monetary Policy Statement, 2019-20
ICRA Spokesperson Mr Karthik Srinivasan, Group Head, Financial Sector ratings shares his views on the overall impact of Monetary Policy.
“Change in policy stance to accommodative and benign inflation outlook and the likelihood of further rate cuts led to a decline in government bond yields. Further, the stance on maintaining comfortable liquidity conditions also indicate towards the possibility of further open market purchase of these bonds by RBI during FY2020, the extent of will depend on foreign capital inflows”.
“During the last few quarters, supported by various liquidity infusion measures, the overall liquidity deficit has remained within the RBI targeted levels of 2% of net demand and time liabilities; however, the extent of volatility has been high. The proposed review of liquidity management framework is hence positive as there is a need for greater clarity on the usage of various tools or liquidity levels at which various triggers for liquidity infusions get activated to improve the transparency of the liquidity framework”.
ICRA Spokesperson Mr Anil Gupta, VP and Sector Head, Financial Sector ratings shares his views on RBI Policy and its implication on banks.
“With 50 bps decline in benchmark government yield during last month, we expect GoI to induce a cut in rates for various small saving schemes in coming quarterly review of these rates. This coupled with RBI’s stance of maintaining neutral liquidity shall enable banks to induce cut in their deposit rates and transmit the same in their lending rates. With the change in policy stance to accommodative, the downward revision in inflation estimates and slowing GDP growth, there appears to be a possibility of a future cut in policy rates in coming quarters”.
“Reduction in leverage ratio (defined as Tier1/Exposure) from 4.5% at present to 4.0% for systematically important bank and 3.5% for other banks, will improve their ability of some banks to support growth in their exposure, however the same will be driven by additional exposures being of lower risk weights, such that they are able to maintain their capital ratios while reducing leverage ratio”.
ICRA Spokesperson Ms Supreeta Nijjar, VP and Sector Head, Financial Sector ratings shares her views on RBI Policy and its implication on MFIs.
"Availability of on-tap license for small finance banks is positive, especially for entities operating in the micro-finance segment as this can improve their liability profile and provide them with sustainable growth model".