The Reserve Bank of India (RBI) has maintained the status quo on rates in the monetary policy. Brokerage firm CLSA states that the RBI's decision to maintain the status quo highlights two important developments and data points.

First, while the fortnight data is not out yet, overall credit growth has moderated to 5.6 percent year-on-year (March 26) from 6.5 percent (March 12). This implies a 1.6 percent year-on-year (YoY) sequential growth in the last fortnight versus 2.5-3.0 percent sequential growth in the past few years, implying that credit growth trends remain muted mainly due to weak corporate loan growth and will be a key monitorable aspect for the sustained rerating of large private banks.

The brokerage firm’s base case is 8-9 percent YoY credit growth over FY2022/23 primarily driven by the normalisation of retail growth to over15 percent.

Second, the RBI has asked banks to give an account of interest on interest waivers and refunds for all borrowers in the fourth quarter of FY21. Also, the government had funded interest on interest reversal for loans less than Rs 2 crore. For loans over Rs 2 crore, banks will have to account for the impact in the fourth quarter of FY2021 and will need to see if the government will foot that bill later.

CLSA estimates an impact of Rs 9,000 crore for banks for the fourth quarter of FY2021 and this will be a one-time hit of less than 10 basis points of loans based on the forecast.

(Edited by : Jomy)

First Published:Apr 9, 2021 7:06 PM IST