Responding to the pause in the monetary policy action announced by the banking regulator today, State Bank of India (SBI) chairman Dinesh Khara has said it was a “pleasant surprise” amid the uncertainty. “The RBI's decision to pause rate hike, for now, was a pleasant surprise given the market talks of one more final rate hike. With uncertainty looming large, this decision was perfectly timed,” said Khara.
“Simultaneously, the bouquet of regulatory initiatives like linking UPI to credit and developing the onshore market will spur innovations in product offerings. The decision to enable tracing unclaimed deposits and strengthening grievance redressal is customer-centric. Overall, RBI’s April policy guides the market in terms of expectations alignment,” Khara added.
Keeping the benchmark rates unchanged, the RBI’s monetary policy committee marginally increased the FY24 GDP growth projections to 6.5% from 6.4% earlier. The move comes when the World Bank lowered India's FY24 GDP growth estimate to 6.3% from its earlier projection of 6.6%, on the back of lower consumption growth and challenging external conditions.
The street was expecting a hike of 25 basis points in the repo rate to 6.75% from 6.50%. Policy action would have further increased the home loan cost, which has already breached the 9% level. In fact, in a press conference held earlier this week, Assocham president Ajay Singh urged the RBI to pause the policy action due to the adverse impact of the high-interest rates on the economy.
“Our suggestion would be to consider carefully before any further hikes. A 25 basis point hike in the repo rate is being talked about. We feel that the time has come for a pause in the rate hike. Various sectors of the economy like the auto sector, and housing sector need a signal now,” Singh said.