Amid rising inflationary pressure and a grim economic outlook, the Reserve Bank of India’s Monetary Policy Committee (MPC) announced that the repo rate will remain unchanged. The RBI Monetary policy has called forth responses from industry leaders.
In a significant move, RBI Governor announced Rs 10,000 crore at repo rate to NABARD and NHB to alleviate the liquidity crisis.
“The MPC’s decision to keep rates unchanged was in line with our expectations though the market had some expectations. The RBI has already cut 115bp this FY and inflation over the last couple of months was beyond the band expected. However, due to the growth slowdown, the RBI may act on future policies, and inflation is also expected to come down in H2 due to base effects. Enough liquidity is ensured for the market,” said Sudhakar Shanbhag, Chief Investment Officer, Kotak Mahindra Life Insurance Company Ltd.
Dhruv Agarwala, Group, CEO – Housing.com, Makaan.com, and Proptiger.com said, “As the economy is still to recover to pre-COVID levels and the risk to aggregate demand in the near future remains high, it is important that the transmission of past rate cuts are more effectively passed on to consumers as well as industry. However, it is indeed heartening to hear that the average lending rates have fallen by close to 90 bps since March 2020. Additionally, the liquidity in the banking system seems to be at comfortable levels. Nevertheless, the RBI’s decision to provide additional liquidity to the tune of Rs 5,000 crore to NHB augers well for the stability of HFCs that will provide some growth impetus to the real estate sector in turn.”
Jyoti Vaswani, CIO, Future Generali India Life Insurance Co Ltd said, “The decision of ‘status quo’ stems from the fact that the near term inflation outlook remains uncertain owing to supply-side disruptions and cost-push factors and thus underscores MPC’s cautious stance and its commitment towards its prime objective of inflation targeting. Nonetheless, the MPC has conspicuously signaled further policy space by maintaining the accommodative stance, thus giving reassurance to the markets of the requisite support as the inflation recedes in the second half.”
Amit Modi, President (Elect) CREDAI Western UP and Director ABA CORP said, “Market experts predicted a repo rate cut by 25bps in today’s announcement by RBI, but fortunately the longing demand from real estate sector of loan restructuring was declared. With the consumer confidence low due to the ongoing pandemic situation, and real estate sector going through a period of strife, we appreciate the government’ efforts and a keen eye to look into initiatives that will help us in generating more demand in the real estate market as well as helping millions of first-time homebuyers to realize their dream. Loan restructuring will strengthen the real estate outlook for developers in the coming years and pave way for a consistent growth.”
“With sharp reduction in policy rates announced since March, a pause was always on the cards. But we expected the apex bank to announce some measures like restructuring of loans, which could have reduced the stress on the sector and given boost to demand. However, the decision to constitute an Expert Committee under imminent banker KV Kamath to recommend financial parameters, along with the sector-specific benchmark for resolution plans is a welcome step. The infusion of Rs 5000 crore in NHB is also a step in the right direction to boost liquidity,” stated Mohit Goel, CEO, Omaxe Ltd.
Dhiraj Jain, Director, Mahagun Group said, “India is going through one of the biggest economic crises because of the global pandemic situation, and real estate is also facing the pinch like other sectors. A sector that contributes handsomely to the GDP needs handholding and the developers are voicing their concerns in a bid to make the government pay heed to their demands. One of the demands is of loan restructuring which will help tackle the liquidity crunch that real estate has been struggling with for quite some time now. Developers are not getting fresh loans or even the top-ups which are hurting the construction activities. Loan restructuring has been done for the MSMEs and we were expecting that the Apex bank would consider it for real estate too. Liquidity is a big concern and a halt in activities during the lockdown affected the cash flow. The government has to consider it in order to ensure the smooth functioning of infrastructural development.”
Many industry leaders including Navneet Munot, CIO, SBI Mutual Fund believe that the regulatory and macro-prudential measures announced in the policy hold more importance than the rate decision. He said, “With substantial easing provided on both rate and liquidity front, the focus has rightly shifted on regulatory measures.”
RBI Monetary Policy involves the management of money supply and interest rates. Amid the possibility of high inflation, and a grim economic outlook, the current monetary policy becomes more significant. RBI Governor, Shaktikanta Das said that the central bank was mindful of its responsibility to maintain financial stability.