“We can see it in terms of its inflation objective, we can see it in terms of its overall sustained growth paradigm, we can see it in terms of a better functioning financial market or better functioning overall credit market as well,” says Siddhartha Sanyal, Bandhan Bank.

It appeared to me in this policy that the additional measures which had the last 15 minutes of the policy were much more meatier and appeared much more significant and new rather than the policy which was more or less on the expected lines and on growth, inflation management and liquidity. So, I will start in reverse, particularly the point on more transparency required for the MSME part and also the clear mention on fraud and risk on the online Aadhaar based payment. What did you make of it? Are there some practices in the lending sphere which may be making the regulator a bit nervous or cautious?
Well, I think generally the regulator’s approach has been very cautious and well-rounded approach and that is most justifiable as well. So, I think that way wherever they think, not necessarily they might have anticipated something wrong in any of the current situation, but they are trying to make the overall system in a lot of areas a lot more foolproof. So that way, it is not surprising and possibly that gels very well with the governor’s last concluding quote from Mahatma Gandhi that these are all possibly small steps, but he highlighted the determination towards moving towards one particular situation. Now, we can see it in terms of its inflation objective, we can see it in terms of its overall sustained growth paradigm, we can see it in terms of a better functioning financial market or better functioning overall credit market as well. So, I think that particular approach can be seen everywhere in whatever they had been doing over the course of the last several years. But importantly, I think it is important to take a quick note of the overall headline initiatives also that they have done because there was a lot of expectation, a lot of concern around the liquidity situation, not so much on the rates front and given that the governor tried to explain the situation so very patiently, so very clearly, I think that should help the market.

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What do you make of this bullishness that we saw in terms of the growth estimates? Do you think these are realistic, 7%, and inflation also coming down to the levels of around 4.6, 4.7 by the year-end? And what does it do to your own expectations of a rate cut?
Well, on the growth front, one would have to give the RBI the benefit of doubt because the projections they have done of late have actually turned out to be true more often than not and there had been some upside surprise on growth numbers, at least at the headline level.

There can be debate that whether at various pockets of the economy, whether the growth momentum is equally strong or not and opinions can be very-very different but at the same time at the headline growth level you have to go with RBI’s numbers at this moment.

Interestingly, the inflation forecast that they are talking about at this moment, they are talking about anywhere less than 5% inflation number only in the Q2 of the next financial year, which is five-six months down the line, will reach that particular zone.

Incidentally, the call that we are maintaining on the rate cut per se is also something very similar. We do expect rate cuts not to start before August monetary policy, so that means we are talking about six months from now. I mean, at least another six months we do not really expect any rate reduction. Having said that, in this particular policy, as Abheek also mentioned we had also expectation of a slightly more categorical and explicit liquidity support.

Governor explained very clearly that structural liquidity is still in positive, but the frictional liquidity part is very significant and we have seen large banks hiking deposit rates even at the fag-end of the rate hike cycle. So, I think that particular point we did expect that there could be some announcement about a longer dated VRR auction kind of a structure where banks would have been getting some more durable liquidity, especially in the months of February and March. But I will not really be too surprised if we get some announcement in that direction outside the policy over the course of the next few weeks as well.

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