Reactions to the mid-term review of RBI credit policy

Alok Agarwal
10 October 2000

Terming the credit policy as "positive, positive and positive", Mr. Gul Tekchandani, head of research, Sun F&C Asset Management, said, "The policy has allowed IPO funding, which is very good for the markets. It has also induced a better risk management system, especially for brokers, which is a healthy sign. I see markets going up. Overall the policy will help boost investment as well as industrial activity".

Mr. R Sreesankar, head of research, DSP Merrill Lynch Asset Management had diametrically opposite views. He said, "Nothing much has changed. There is nothing surprising about the policy, with the contents therein being neither detrimental nor beneficial to the economy. To that extent the policy has become a non-event because, as declared by him earlier, the RBI governor is not going to wait for the policy if he has to make any changes or if he has to take an action."

Mr. Sreesankar did not agree to the suggestion that the policy contained measures, which would boost the market. He said, "There are no triggers for the market. Earlier also there were bank funds available for IPOs. The changes are purely cosmetic." He, however, believed the policy could do very little to give a demand related boost to the economy because there is so much of in built capacity. The evening out process will at best be gradual.

According to Mr. Abhay Aima, head equities and banking group, HDFC Bank, there is nothing in it at all. He was, however, very fair to Dr. Jalan when he stated that the governor had not built any expectations. He stated, "Sometime back Dr. Jalan had said that that credit policies henceforth are going to become non-events and to that extent he has lived up to what he had said. Moreover one must remember that he his living through the scare of the rupee."

Mr. Aima feels that measures like making available bank funds for IPOs and allowing banks to invest upto 5 per cent of incremental deposits have been there and the policy has only formalised them. This is not going to have much impact. He added that banks could take risk only upto a limit, since they are dealing with public money.