RBI governor has brought the ecosystem of growth back to Indian Banking corridors

Governor Shaktikanta Das' maiden policy announcement has ensured 'growth' re-enters the central banking vocabulary and there are chances of more rate cuts like the one delivered surprisingly Thursday, analysts and industry observers said. "Growth re-enters the central bank's vocabulary as something to be cherished and not to be viewed exclusively as something that raised the risk of inflation," economists at largest private sector lender HDFC Bank said.

Leading ratings agency Crisil Ratings also said the clear focus of the policy has "shifted" to growth with the policy announcement and added that it "stumps" those who were pitching for a status quo earlier. Crisil also welcomed the shift in stance to "neutral" from the earlier "calibrated tightening" done unanimously by the six member monetary policy committee as an effort in the right direction.

The policy "jettisons the needless choreography" of the monetary policy ritual with a change in 'stance' first, followed by a possible cut in the actual rate, HDFC Bank said. "The RBI seems to be operating ahead of the curve now and this should be comforting for the markets," it said, adding one more rate cut may be in the offing.

A rate cut can support a broader recovery in credit growth and push up the growth momentum, it said. Foreign brokerage Bank of America Merrill Lynch said the market can expect another slithering action in the April 4 policy as high real interest rates are hurting growth and the MPC's inflation risks are being "overdone".

Economists at private sector lender Yes Bank said they expect a long pause as the headline inflation will edge up to 4.1 percent in FY20 from 3.7 percent in FY19. Crisil said some risks to inflation can emerge from consumption focused expansionary fiscal policy, sticky core inflation, and normalization of food inflation (negative now) which could gain speed if the monsoons are sub-normal.

Moderate upturn in global food prices and efforts to raise farm incomes can put upward pressure on inflation numbers, it added. The reduction in risk weights for NBFCs is expected to free up Rs 12,500 crore of equity capital for banks against their exposures to NBFCs, which the banks can use for incremental credit growth or improvement in their capital ratios, ratings agency Icra said.

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