India’s RBI to ‘Play it Slow’ on Defending Rupee, Axis Bank CEO Says
Source: Live Mint
(Bloomberg) — India’s central bank is unlikely to mount a strong defense of the rupee despite the currency’s sharp depreciation, according to Axis Bank Ltd.’s chief executive officer.
“I think they will play it slow. We can’t continue to spend such a huge amount of our reserves on just defending the rupee,” Amitabh Chaudhry said in a Bloomberg Television interview at Davos on Monday. The executive also offered a dim assessment of the Indian economy, saying the macroeconomic situation “looks tough.”
The rupee has gone from being one of Asia’s best-performing currencies to one of the region’s biggest losers in a matter of weeks. Last week it fell below 86 to the dollar — a new low — and has continued to trade below that mark.
Meanwhile, the country is grappling with a deepening slowdown and softening urban consumption — the latest government figures show the economy will expand at a four-year low of 6.4% in the current fiscal year.
Chaudhry said he isn’t hopeful of major fiscal support measures in India’s annual budget scheduled to be presented next month, since the government is committed to reducing the fiscal deficit. He also doesn’t expect rate cuts to make much of a difference to the growth trajectory.
“But you need to infuse liquidity into the system,” he said. “You need to allow for a slightly higher credit growth.”
He said that while global events like a potential US-China trade war under a Donald Trump administration could impact growth, the onus will be on policymakers to work on reforms to boost the economy. “A lot of the things do need to be solved internally in India,” he said.
Discussing the outlook for Axis Bank’s performance, Chaudhry said that he doesn’t expect deposit growth to “change dramatically,” unless liquidity returns to the system. The lender’s shares are trading at their lowest level since November 2023 after earnings showed higher slippages and credit costs for the quarter ended Dec. 31, as well as tepid growth in deposits.
Asset quality in the banking sector “is stabilizing and it will hopefully trickle down in the right direction from here,” he said. “But yes, you have to be watchful because the macro seems uncertain.”
–With assistance from Preeti Singh.
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