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Below is Comment on RBI monetary policy-out of cycle rate hike By Mr. Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance

“We had expected the RBI to hike rates from second half of the fiscal and hence the timing and quantum of RBI repo rate hike by 40bps and hike CRR by 50bps mid-cycle was a bit of surprise. The RBI has hiked rates, owing to the rise in fuel costs and food inflation on account of geo-political concerns which has turned out to be a long term issue. The supply chain related inflation is another challenge altogether. We believe that the lending rates may go up gradually, and since there is enough liquidity in the system, our borrowing cost may go up only gradually. Most of the borrowing for us is fixed in nature and hence the rate hike will not have an immediate impact on borrowing cost. I still believe that the economy is recovering & growing, and I don’t think a 40bps rate hike will dampen demand. Most of the high frequency indicators do indicate the Indian economy is gradually recovering and given the ongoing geo-political situation, it was prudent to manage the evolving growth-inflation dynamics.”

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