What's your view on the RBI's monetary policy?
While the status quo in the key interest rates was expected, the 1% slash in the SLR did come as a surprise. It is evident that inflation concerns of RBI have increased in the past few weeks due to inadequate rain fall, devaluing Rupee and late resurgence in crude oil prices.
It is expected that the reduction in the SLR may provide structural support to systemic liquidity. However, banks have historically been investing over and above the stipulated limit. Thus, they may not re-think their allocation ratio for now in an 'inflationary and moderating' economy. At a more fundamental level, the policy position makes it apparent that growth stimulus may have to emanate from the political economy, as the central banker adopts a more hawkish stance to manage inflation.