Senior banking executives on Wednesday welcomed the Reserve Bank of India (RBI)'s decision to hold the repo rate at 5.25% and maintain a neutral stance, while also backing the central bank's proposed resumption of on-tap licensing for Urban Cooperative Banks (UCBs) as a meaningful step toward deepening financial inclusion and last-mile credit delivery.

SBI and IBA Chairman on Cooperative Banking

CS Setty, Chairman of the State Bank of India (SBI) and the Indian Banks' Association (IBA), said the proposed measures to deepen the cooperative banking ecosystem — including the resumption of UCB licensing and addressing portfolio concentration in rural cooperatives — would further strengthen financial inclusion. Setty also welcomed the RBI's revised outlook, noting that the decision to keep the policy rate unchanged while revising the growth forecast upward and the inflation forecast downward reflects a 'balanced and pragmatic approach.' He added that the proposed review of the interest rate framework to enhance transparency in loan pricing and strengthen monetary transmission is 'a welcome step.'

Indian Overseas Bank Flags Global Uncertainty

Ajay Kumar Srivastava, Managing Director and CEO of Indian Overseas Bank, said the RBI's decision to hold the repo rate and continue with its neutral stance reflects confidence in the resilience of the Indian economy, even as global conditions remain volatile amid the West Asia conflict and shifting trade policies. 'The Reserve Bank's own assessment shows the banking sector continues to hold strong capital buffers, healthy liquidity and improving asset quality, which reinforces confidence in the stability of the financial system,' Srivastava said. He also noted that the proposed harmonisation of interest rates on advances across all regulated entities, along with the draft UCB licensing guidelines, would strengthen transparency and customer protection.

Credit Growth and MSME Support in Focus

Vinod Francis, Senior General Manager and Chief Financial Officer of South Indian Bank, said the RBI's decision to maintain the policy rate enhances stability and will sustain India's strong credit growth momentum. 'This policy stability will continue to support healthy credit demand across MSMEs, retail and commercial banking, underpinned by resilient domestic demand and continued investment activity,' Francis said.

Markets Likely to Shift Focus to Macro Data

Radhika Rao, Senior Economist and Executive Director at DBS Bank, noted that the overall guidance was 'less hawkish than anticipated.' With rates unchanged and no immediate signal of tightening, she said market attention is likely to shift back to macro developments ahead of the next policy review. Rao added that the expected recovery in portfolio inflows, together with continued flows through RBI swap windows, 'should provide a constructive backdrop for domestic financial markets.'

What Comes Next

The RBI's draft guidelines on UCB licensing and the proposed interest rate harmonisation framework are awaited by the sector. Bankers broadly expect that if domestic macro conditions hold and global headwinds — particularly from West Asia and evolving trade policy — remain contained, the current neutral stance provides the central bank adequate room to manoeuvre at its next review.