The RBI’s decision to maintain the policy rates was in expected lines said Smt. Arundhati Bhattacharya, SBI chairman. Appreciating the move by RBI to go into Open Market Operation (OMO) she added that transmission of rates will happen gradually over the next few months as credit growth picks up pace.
Dr. Rudra Sensarma, Professor of Economics,IIMK further added that RBI may not have wanted to cut domestic rates at this juncture that would have led to capital outflows and weakening of the rupee.
Further action on the repo rate can be expected only after the effects of monsoon and salary hikes of government employees, he said.
“But by then an interest rate cut may become unnecessary if banks start lowering their lending rates as they clean up their books and begin facing competition from new entities such as payments banks and small finance banks he added. Moreover the recently released strong US jobs data indicates that the US economy continues to recover which meant that the RBI may be inclined to raise interest rates sooner than later was his inference,” he added.
VS Parthasarathy, group CFO of Mahindra & Mahindra called the latest move Rajan’s ‘Swan Song’, and credited him with delivering what he promised when he took over the reins three years ago.
“He is leaving on a high note having delivered on what he promised – a very strong foreign exchange reserve position, a steady Rupee, a national focus on keeping ‘relevant’ Inflation (CPI) in a band between 2% – 6%, and the country’s liquidity position improving from ‘deficit’ to ‘surplus’. As a result, he has prepared the stage for the new incumbent to play a symphony,” he said.