RBI MPC Meeting: SBI hails RBI for allowing more lendable resources to retail banks
RBI's decision to adjust the Leverage Ratio could add a potential Rs 1 lakh crores to the lendable resources of the banks.
The State Bank of India (SBI) has welcomed the RBI Monetary Policy Committee (MPC) review decision to cut bank rates by 25 bps and adjusting the Leverage Ratio, which in terms of SBI, would add a potential Rs 1 lakh crores to the lendable resources of the banks. The largest public sector bank of India also hailed the RBI for announcing the launch of the online trading platform for retail participants.
Speaking on the RBI MPC meeting decisions Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI said, "On the developmental and regulatory policies, there are a lot of positives. The decision to adjust the Leverage Ratio could add a potential Rs 1 lakh crores to the lendable resources of the banks. RBI has also scrapped transaction charges for RTGS & NEFT. In a positive development for small & medium forex clients, RBI has also announced the launch of the online trading platform for retail participants. The decision to issue the draft for “on-tap” licensing of small finance banks is likely to add depth to this sector. As per the estimates, one ATM transaction costs around Rs 30 (based on 120 transactions/per day), while banks charges customers a max of Rs 20 per transaction. Against this backdrop, RBI’s decision to review the entire gamut of ATM charges and fees is very timely."
The RBI decided to cut Repo rate by 25 bps with a unanimous vote of 6-0. The RBI also changed its stance to “ accommodative” which will more likely than not help the financial system to navigate to a lower term structure of interest rates and also accommodate growth concerns at the same time. For FY20, GDP growth forecast has been cut by 20 bps to 7.0%, which could be a tad optimistic. It remains to be seen whether the liquidity, that is currently in surplus mode, is sufficient for the banks to push down deposit rates, as that will surely dictate the trajectory in lending rates even as more rate cuts are in the offing (up to 50-75 bps we are re expecting in the current cycle).