DANCING IN TUNE: AT THE FORTUNE INDIA BOARDROOM, LEADING BANKERS AND EXPERTS HIGHLIGHTED THAT THE TIME IS RIPE FOR THE BANKING SECTOR TO TAKE CUES FROM THE CENTRAL BANK AND MATCH ITS PACE.

A 100-BASIS-point repo rate cut, liquidity release of ₹2.5 lakh crore by slashing the cash reserve ratio (CRR) by 1%, eased project finance and gold finance norms, and relaxed liquidity coverage ratio allowing banks to assign lower liquid assets against digital deposits—the Reserve Bank of India (RBI) is not mincing words.

- BY ASHUTOSH KUMAR

“Since January, we have injected a lot of durable liquidity through various means like CRR cut, open market operations, and buy-sell swaps. A total of ₹9.5 lakh crore of durable liquidity has been injected into the banking system since January. As a result, after remaining in deficit since mid-December, liquidity conditions have transitioned to surplus as of the end of March,” said RBI governor Sanjay Malhotra, as he announced the repo rate cut on June 6. The regulator also deferred the expected credit loss guidelines, which mandated anticipatory loan-loss provisioning by banks.

The slew of liquidity measures, all in under six months, has enthused the banking sector to chase growth. That was the underlying message during Fortune India’s Boardroom on ‘Pursuing Growth, Managing Risks’ held on June 27 in Mumbai. At the event, leading bankers and experts highlighted that the time is ripe for the banking sector to take cues and align with the RBI's momentum.

According to K.V.S. Manian, MD and CEO of Federal Bank, a mere front-loading of the rate cuts will see the banking sector bouncing back in the third and fourth quarters of the current fiscal. Liquidity measures indicate that the RBI is growth-conscious. On the monetary side, we have played our hand. Now, it is for others to pitch in.”