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Bankers have ruled out lowering deposit and lending rates in the near future after the Reserve Bank left all the key policy rates unchanged on enduring worries on inflation front.
While large banks skirted a direct answer on repricing of assets or liabilities, Bank of India head V R Iyer was very forthcoming, saying there is no room for any rate cut soon.
"We do not expect any movement in interest rates in near future as a consequence of policy measures," Iyer said.
On deposit rates, Chanda Kochhar, ICICI Bank MD, said her bank doesn't wait for a year to change deposit rates and they watch them on a dynamic basis.
"It is the question of not just the rates across the system, but a question of your own liquidity situation as well as the credit off-take that you see. I think today everyone is kind of balancing that...there is no change immediately on cards, but that doesn't mean that one will wait for a year to see it (rate cut)," she said.
HDFC Bank Managing Director Aditya Puri highlighted correlation between credit-deposit rates and credit demand.
"Both the lending and deposit rates are a function of credit demand, which currently is not exceedingly healthy. If credit demand picks you would see a lowering on deposit rates.
"If it doesn't pick up, and there is a lowering of deposit rates, you can possibly see some reduction on the asset rates," Puri said, addressing the press at the customary post-policy meeting at the RBI headquarters.
SBI Chairperson Arundhati Bhattacharya said RBI's move was widely expected.
"The RBI move to maintain status-quo was as per market expectations. The policy statement reinforces that any adjustments in the repo rate will be data dependent in future, but in the same breath mentions that near-term inflation risks are on the downside and that disinflationary trends are getting entrenched."
However, she was quick to add that the tone of the policy seemed a bit dovish compared to March. "If you see the fan charts it shows that the possibility of downside are more than the upside risks. There are disinflationary trends which are now getting entrenched," Bhattacharya said.
Describing the policy stance as on expected lines, Kochhar said the move underscores the stability of thinking in monetary policy. Kochhar welcomed inclusion of SLR securities up to 5 per cent in the computation of liquidity coverage ratio (LCR).
"Overall, the policy takes forward the development of new monetary policy framework and approach to banking system development, while ensuring that global requirements are implemented in a non-disruptive manner and by factoring in the domestic scenario," Kochhar said.
IBA Chairman T M Bhasin, who is head of Indian Bank, termed the policy as "a balanced one from the economic perspective and futuristic on various operational aspects of the banking like hiking Government securities held by banks to qualify for high quality liquid assets (HQLA) by another 5 per cent, staggered cuts in HTM (held to maturity) requirements, among others."
Iyer of Bank of India said given the reverse repo auctions of about Rs 20,000 crore, cut in export refinance from 32 per cent to 15 per cent will not have much impact as the financial system has excess liquidity.
Guidelines for cut in HTM, spread over one year beginning January 2015, are a welcome step as they remove uncertainty on this issue, he said.
Federal Bank Managing Director Shyam Srinivasan said the relaxation in guidelines on LCR would help the banks meet the LCR requirements smoothly. On norms on non-cooperative borrowers, Bhattacharya said they would empower the banks to get a quick resolution of their stressed assets.
Srinivasan said the decision to frame guidelines for declaring borrowers as non co-operative and form a Central Fraud Registry would help ensure better credit discipline and reduce risk.