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... But bankers note liquidity rise can’t lower lending rates

Bankers on Tuesday said that the RBI's decision to hold key rates, coming after a decisive mandate received by the Narendra Modi government, was on expected lines and interest rates won't change even though the central bank's SLR cut infuses additional liquidity into the system.
‘This was very much on expected lines and what is important is the consistency which the RBI has shown in its moves, like the focus on the consumer price inflation number and a clear articulation of the guidance,’ Bank of Baroda Chairman and Managing Director S S Mundra said.
Assocham President and Yes Bank Managing Director and CEO Rana Kapoor said: ‘While SLR cut by 50 bps will make available a little more money for lending by banks, the issue facing the industry at this point of time is not so much of liquidity but the cost of borrowing. With robust foreign inflows, the system has ample liquidity’.

Chanda Kochhar, who heads ICICI Bank, the largest private sector lender, described the policy as very ‘balanced’ and ‘pragmatic’, coming in the wake of the strong electoral mandate.

‘The decision to hold the rates reflects the current level of inflation as well as the expectation of policy and administrative actions from the government in the coming months to address inflation as well as boost growth,’ Kochhar said.

On the 0.5 per cent reduction in the statutory liquidity ratio (SLR), Mundra said it is not very surprising as the RBI had already hinted that in the medium to long term, its intention was to bring it down to help productive sectors.

Indian Overseas Bank Chairman and Managing Director M Narendra said his bank is not considering any rate change even though he gets about Rs 1,600 crore released because of the SLR cut and the decision to reduce the export credit refinance (ECR) limit to 32 per cent from 50 per cent.
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