(MENAFN- KNN India)
New Delhi, Jan 13 (KNN) Newly appointed Reserve bank of India (RBI) Governor Sanjay Malhotra is set to hold his first interaction with bank leaders on Thursday as part of pre-monetary policy consultations.
The meetings, scheduled ahead of the February 5-7 policy review, will see Malhotra and senior RBI officials engaging with public sector bank chiefs in the morning followed by private sector bank leaders in the afternoon, according to Business Standard sources.
The February policy review comes at a critical juncture, with India's economic indicators showing mixed signals. The country's GDP growth has decelerated to a two-year low of 5.4 percent during July-Sept, while inflation remains elevated at 5.48 percent in November.
The central bank has maintained the policy repo rate at 6.5 percent since February 2023, following a cumulative increase of 250 basis points that began in May 2022.
While the policy stance was shifted to neutral in October, some market participants anticipate the initiation of a rate-cutting cycle in the upcoming February review.
Banking sector dynamics are expected to dominate the discussions, with particular focus on growth, liquidity, and deposit mobilisation.
The industry has witnessed a significant slowdown in credit growth, dropping to 11.4 percent in the fortnight ended December 27 from 20.2 percent in the previous financial year. Deposit growth has now converged with loan growth, addressing earlier concerns about the widening gap.
The banking system is currently experiencing tight liquidity conditions, with the deficit reaching Rs 2 trillion. The RBI's intervention in the foreign exchange market, selling dollars to support the rupee, has contributed to this situation.
The Indian rupee recently touched a new low of 85.97 against the US dollar, marking a nearly 3 percent decline in 2024, contrasting with its relatively stable performance in 2023.
Following the December policy review's 50 basis point reduction in Cash Reserve Ratio (CRR) to 4 percent, which released Rs 1.16 trillion in primary liquidity, there are calls for further CRR cuts. The banking sector is seeking additional measures to address the ongoing liquidity constraints.
Customer service improvements are also expected to feature in the discussions, aligning with Malhotra's recent emphasis on customer centricity.
In his new-year message to RBI employees, the governor stressed the importance of providing seamless and user-friendly services, highlighting his focus on enhancing the banking experience for consumers.
(KNN Bureau)
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