Mumbai: Country's largest lender State Bank of India on March 4 welcomed the second surprise rate cut by Reserve Bank and promised to take an "appropriate call" on its lending rates. "We welcome the repo rate cut by RBI... Our bank will take an appropriate call of a cut in base rate by looking at all evolving circumstances," SBI chairperson Arundhati Bhattacharya said in a statement.
She said the government's commitment of "qualitative fiscal consolidation" as well as the agreement reached between RBI and the government on inflation targeting will ensure inflation to stay benign. This will help the banks in their decision-making, she added. State-run Bank of Maharashtra's executive director R K Gupta said the rate cut shows the central bank's comfort about the quality of fiscal consolidation and is a positive for growth.
Encouraged by softening inflation and fiscal consolidation roadmap by the government, RBI on March 4 slashed key policy (repo) rate by 0.25 per cent to 7.5 per cent, the second such surprise rate cut outside regular policy review in less than two months.
It has been decided to "reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.75 per cent to 7 per cent, Rajan said in a surprise early morning note, which comes within two days of the RBI and government disclosing the inflation target. Bankers have been criticised for not passing the benefits of previous rate cuts as well as the softening in money market rates to customers.
They have been focused on using the space to expand margins and also make the balance sheets healthier. Reacting to the rate cut, non bank lender Indiabulls Housing Finance's vice chairman and managing director Gagan Banga said, "The repo cut is a clear statement of intention from RBI about its growth focus and its comfort on inflation over the medium-term."
He exuded confidence that with RBI and the government working in sync, the upcoming growth cycle will be longer. The BSE's Bankex was trading 392 points up over the previous close at 23,312 at 1100 hours.
