MPC Decisions To Further Increase Credit Flow, Promote Inclusive Growth: Bankers

(MENAFN- IANS) New Delhi, Oct 1 (IANS) Bankers on Wednesday welcomed the Reserve Bank of India's (RBI) decision to maintain the repo rate at 5.5 per cent with a neutral stance, saying the move reflects a balanced approach in supporting growth and ensuring price stability.

A neutral stance requires neither stimulation nor curbs on liquidity as it strikes a fine balance between controlling inflation without hurting growth.

According to Binod Kumar, MD and CEO of Indian Bank, the RBI MPC's stable policy fosters predictability for customers, translating to predictable EMIs and timely access to credit, which aids current consumption plans.

“This stability, along with lowering the risk weight on MSME and residential real estate, will boost demand in this sector. This supports broader economic objectives, including the ongoing efforts to internationalise the Rupee and propel India's trajectory towards developed country status,” he said in a statement.

The RBI also raised its projection of India's GDP growth rate to 6.8 per cent for 2025-26 from 6.5 per cent earlier.

Ajay Kumar Srivastava, Managing Director and CEO, Indian Overseas Bank, said with inflation under control, aided by easing of food prices and GST rationalisation, the upward revision of GDP growth to 6.68 per cent for FY26 showcases resilience of the Indian economy despite global volatility.

“For the banking sector, measures set towards regulatory initiatives such as proposed risk-based deposit insurance premiums, easing of risk weights for MSME and residential real estate lending, and enabling framework for corporate acquisition and capital market financing is expected to further increase credit flow in the market and promote inclusive growth,” said Srivastava.

Furthermore, the focus on expanding bouquet of services for basic bank savings deposit accounts through mobile and internet services will also have positive impact on consumers, he added.

According to Rajosik Banerjee, Partner and Deputy Head, Risk Advisory, and Head - Financial Risk Management, KPMG in India, said RBI's monitory policy calls out important measures for strengthening the resilience and competitiveness of the Indian banks.

This includes issuance of much awaited Expected Credit Loss (ECL) framework applicable to all Scheduled Commercial Banks (excluding Small Finance Banks (SFBs), Payment Banks (PBs), Regional Rural Banks (RRBs)) and All India Financial Institutions (AIFIs) with effect from April 1, 2027 with a glide path (till March 31, 2031) to smoothen the one-time impact of higher provisioning.

“Additionally, there is a step towards moving towards revised 'Basel III' capital adequacy norms effective April 2027. And finally moving towards the 'Standardized Approach for Credit Risk', proposing lower risk weights on certain segments are expected to reduce the overall capital requirements,” explained Banerjee.

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