Comments of Mrs. V. R. Iyer, Chairperson & Managing Director, Bank of India on RBI Monetary Policy

Repo Rate, CRR and SLR have been kept unchanged. The statement has mentioned that policy transmission has not taken place despite RBI cutting Repo rate in the last quarter of the FY 2015. Inflation is expected at 5.80% by the year end.

To encourage banks to reduce base rates RBI will issue guidelines on the use of marginal cost of deposit in the base rate calculations.  The impact of reduction in cost of deposit experienced during the last quarter will encourage banks to pass on the benefit to customers. Retail borrowers may see lower EMIs.

Banks have been permitted to invest in infra bonds issued by other banks but with a qualification. This will generate trading interest and issuance will become easier.

Net Stable Funding Ratio will be implemented from 1.1.2018 and draft guidelines are expected by May this year. Banks will have to realign their balance sheet and dependence on borrowed funds will need to be reduced gradually.Retail sale of G-Sec will be encouraged and infrastructure in this regard will be improved. This will deepen the G-sec bond market.