Kochi, Sep 30 (PTI) Leading bankers in Kerala on Friday welcomed the hike in key interest rate by RBI and said the move was timely and calibrated to address the growing concerns about spiralling inflation while supporting overall economic growth.

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The Reserve Bank of India (RBI) on Friday raised the key interest rate by 50 basis points, the fourth straight increase since May with more hikes expected to rein in inflation.

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The monetary policy committee (MPC), comprising three members from the RBI and three external experts, raised the key lending rate or the repo rate to 5.90 per cent - the highest since April 2019.

Group president and CFO of the Federal Bank Venkatraman Venkateswaran said the 50bps increase in repo rate was in line with consensus.

"RBI is confident of India's growth trajectory even as it acknowledged risks from global events. RBI is also taking steps to address the liquidity deficit, which is believed to be temporary. Government spending is expected to pick up further in H2, which will also aid in maintaining liquidity. It's a balance between inflation control and supporting growth," Venkateswaran said in a statement.

Bankers, however, see RBI increasing the repo rate in its next policy meetings in November and January 2023 though the quantum of rate hike depends on the incoming data on inflation front and the major central banks level of tightening.

"RBI's monetary policy is a well-timed and calibrated one drawn on expected lines to buffer the current challenges of turmoil in global financial markets that has affected economies worldwide. The revision in the repo rate by 50 basis points (5.9%) and SDF to (5.65%) are much needed measures to rope in the concern of inflation," Murali Ramakrishnan, the MD and CEO of the South Indian Bank, said.

He said the Indian economy has remained resilient in spite of global headwinds in an environment wherein recessionary fears were mounting and inflation was high.

"However, the domestic growth, we trust, will continue to show a positive trend and will pick up in FY24," Ramakrishnan said in a release.

Business captains also see no surprise in today's rate hike as they feel it was on the expected lines.

Some of them see business actually picking up despite the rate hike driven by increasing festival demand in the urban centres and a good monsoon driving up rural demand.

"Going forward, we expect to ride out of the current interest rate cycle by capitalising on higher economic growth of 7 per cent since it will translate into demand expansion in urban centres especially during the forthcoming festive season. Also, the better-than-expected monsoon will see rural demand perking up which is another positive for us," K Paul Thomas, the MD and CEO of ESAF Small Finance Bank, said.

Given the current macro-economic construct, the RBI has done a fine balancing act by intensifying its fight against inflation while not risking economic growth, opined V P Nandakumar, the MD and CEO of Manappuram Finance.

"This in my view will keep the Indian currency insulated from high volatility while keeping inflation expectations well anchored. Lowering GDP forecast to 7 per cent mirrors a more realistic assessment of economic growth. On the whole, the MPC's decision has been on expected lines in the given macro-economic scenario," Nandakumar said.

He said at a time when the major central banks pivoting to more hawkish stance and the spiralling inflation as they were confronted with multiple challenges stemming from geo-political tensions, the MPC has served the best policy prescription by raising the repo rate while keeping systemic liquidity in surplus mode.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)