Reaction of industry leaders RBI's monetary policy

The reverse repo rate under the LAF stands adjusted to 5.50%, and the marginal standing facility (MSF) rate and the Bank Rate to 6%.

Jun 06, 2019 11:06 IST India Infoline News Service

RBI-rate-cut-reaction
The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), in its second bi-monthly monetary policy review for 2019-20 has decided to cut the repo rate by 25bps to 5.75% —the lowest in nine years.

Rajnish Kumar, Chairman, SBI
The RBI policy decision to change the policy stance to “accommodative” will simultaneously help the financial system to navigate to a lower term structure of interest rates and also accommodate growth concerns. On the regulatory front, the decision to lower the Basel III Leverage Ratio will augment the lendable resources of the Banks. Also, the move to scrap transaction charges for RTGS & NEFT will boost digital transactions. The decision to issue a draft for “on-tap” licensing of small finance banks will add depth to this sector. Launching of the on-line trading platform for retail participants is a positive development for small & medium forex customers. The RBI intent to harmonize existing regulations for different money market products augurs well for market transparency.

Karthik Srinivasan, Group Head, ICRA
“Change in policy stance to the accommodative and benign inflation outlook and the likelihood of further rate cuts led to a decline in government bond yields. Further, the stance on maintaining comfortable liquidity conditions also indicate the possibility of further open market purchase of these bonds by RBI during FY20, the extent of will depend on foreign capital inflows”.
“During the last few quarters, supported by various liquidity infusion measures, the overall liquidity deficit has remained within the RBI targeted levels of 2% of net demand and time liabilities; however, the extent of volatility has been high. The proposed review of liquidity management framework is hence positive as there is a need for greater clarity on the usage of various tools or liquidity levels at which various triggers for liquidity infusions get activated to improve the transparency of the liquidity framework”. 

Anil Gupta, VP and Sector Head, ICRA
“With 50 bps decline in benchmark government yield during last month, we expect GoI to induce a cut in rates for various small saving schemes in coming quarterly review of these rates. This coupled with RBI’s stance of maintaining neutral liquidity shall enable banks to induce cut in their deposit rates and transmit the same in their lending rates. With the change in policy stance to accommodative, the downward revision in inflation estimates and slowing GDP growth, there appears to be a possibility of a future cut in policy rates in coming quarters. Reduction in leverage ratio (defined as Tier1/Exposure) from 4.5% at present to 4% for systematically important bank and 3.5% for other banks, will improve their ability of some banks to support growth in their exposure, however the same will be driven by additional exposures being of lower risk weights, such that they are able to maintain their capital ratios while reducing leverage ratio”.

Supreeta Nijjar, VP and Sector Head, ICRA
"Availability of on-tap license for small finance banks is positive, especially for entities operating in the micro-finance segment as this can improve their liability profile and provide them with sustainable growth model".

Vijay Mansukhani, MD, Mirc Electronics Ltd.(Onida)
“We welcome this move of 25 bps rate cut. Rate cut of 50 bps would have been better considering the current liquidity and low consumer sentiment in the market. Moving from neutral to accommodative status is encouraging step from RBI. We hope the economy will grow at better rates in Q2FY20.
The low consumer demand in Q4FY19 coupled with low GDP has had a good impact on the company’s earnings, we are hoping for better times during the Q2FY19 onwards.

Vinod Ramnani, Director, Opto Circuits India Ltd.
“RBI rate cut is on the expected lines. With its 'accommodative' stance, we expect the RBI to remain supportive, maintaining liquidity at a slight surplus over the next few months. This liquidity will boost private spending across Industries.  Private spending by corporates coupled with Government spending and consumption will drive the economy.
Amid slowing economic growth and rising global uncertainty, this is a welcome move in our business.”

MadhuSudhan Bhageria, Chairman and Managing Director, Filatex India Ltd.
“RBI rate cut comes at a time when India’s Q4FY19 GDP growth rate reduced to 5.8%, a five-year low under the Modi government. Even though inflation has remained very much under control, the liquidity had been in deficit mode for the past few months.
With its 'accommodative' stance, the RBI has signalled higher chances of more cuts in the coming months if inflation persisted within tolerable limits. This is a positive move for us as this will bolster liquidity and boost private spending across Industries.
The Government has obliquely hinted that at even lower interest rates, the focus appears to have shifted more towards engineering a quick turnaround in the broader economy by boosting consumption and investment, which is the need of the hour.

Sunu Mathew, Managing Director, LEAP India Pvt. Ltd.
The RBI’s move to cut the rate should instil consumer confidence, which would, in turn, spur the growth in Beverages, FMCG, Retail and automobile industry. This also signals that lower interest rate regime as commodities rates are subdued across the world. This is positive news for corporates to tap the expected demand in Q2FY20. With stable Government at centre, normal monsoon coupled with low-interest rate regime and RBI’s initiatives to increase the liquidity, we hope that RBI’s target growth rate of 7% in Q2FY20 would come true.

Khushru Jijina, MD, Piramal Capital and Housing Finance
The downward revision of growth projection by the Reserve Bank of India (RBI) from 7.2 % to 7% in 2019-20 calls for the implementation of additional rapid policy interventions by both RBI as well as the Government. The unanimous decision by the Monetary Policy Committee (MPC) to cut the repo rate by another 25 bps is a step in the right direction. NBFCs are instrumental in providing credit to MSMEs and real estate sectors, that are significant to India’s GDP. MSMEs contribute 31% of the GDP, 40% of exports and hire 25% of the labour force while real estate contributes more than 5% to GDP and hires 17% of the labour force directly or indirectly.

The credit crunch in the NBFC sector has witnessed a corresponding decline in manufacturing and construction activities in the last two quarters of 2018-19. We anticipate more decisive and pro-active policy measures to address the current liquidity crisis, that will enable NBFCs to restore lending activities, especially to these critical sectors.

Mani Rangarajan, Group Chief Operating Officer- Housing.com- Proptiger.com- Makaan.com- Fastfox
In a move that was largely anticipated, the RBI has cut its repo rate by 25 basis points for the third time in a row, this year. The repo rate now is 5.75% and its future monetary stance has been changed from neutral to accommodative, a move that is being hailed by the industry as a much-needed one.

“This move to reduce the repo rate will be great from a sentiment point of view and will add to the current wave of optimism that has been infused into the market, with the re-election of the NDA government. Whether home buyers benefit from this directly or not, will depend largely on whether the banks pass on the rate cut benefits to them. In the past, that has not happened. However, this fact is also to be evaluated in light of another fact - with the ongoing NBFC crisis and increasing NPAs, reducing interest rates for borrowers, is not very easy for banks. We are however hopeful that with the increasing sales momentum in the last quarter and the improved market sentiments post the election results, this move will add a much-needed boost to the current market sentiments.

Zarin Daruwala, CEO, Standard Chartered Bank, India
“The combination of the repo rate cut, the change to an accommodative stance and the resolve to provide adequate liquidity, will provide the impetus to counter growth and investment headwinds. A review of the liquidity framework is a welcome move and should aid monetary transmission. Additionally, the easing of the leverage ratio requirement will boost bank lending and should serve as the much needed countercyclical stimulus.”

Manoj Gaur, MD, GAURS GROUP and Chairman of Affordable Housing Committee, CREDAI (National)
The benchmark lending rate cut by 25 bps to 5.75% is a positive move for the real estate sector before the union budget for FY 19-20. This move will surely benefit banks which eventually can ease Lending in the real estate sector. The third consecutive reduction shows positive signs which can surely enhance the demand for housing, marginally.
Though the past cut wasn’t passed on to the consumers so we would have to wait and watch whether this time the consumers get the benefits or not.

Amit Modi, Director- ABA Corp, President (Elect) CREDAI (Western UP)
Despite the cut in policy rates a third time in a row this year, banks have not passed on the benefits to the consumers on ground, even though the move showcases the RBI’s softer stand towards lending, but all it ends up doing is cushioning the bottom lines of the banks which is counterproductive. Hence, we hope that with this development, the banks will immediately pass on the cut to the home buyers, since that’s the confidence booster for the real estate buyer, and will finally lead to much-needed investment spur in the sector, which will not only culminate in more launches in real estate sector, but more importantly timely project completions as well.

Pradeep Aggarwal, Co-Founder & Chairman, Signature Global and Chairman, National Council on Affordable Housing, ASSOCHAM
The RBI policy rate cut will not only be a positive outcome for the sector, but also for the eligible new home borrowers who can take advantage of the subsidies scheme under PMAY. This move will be a big boost for affordable housing segment and help for first time home buyers. The rate cut brings fetches confidence for the market as this will make availability of more money at the banks thereby lowering the EMI burdens.

Anupam Gupta, Director - Sales & Marketing, GBP Group
Three consecutive repo rate cuts this year is not only a positive outcome for the real estate sector but also for the eligible new home borrowers who can take advantage of the subsidies scheme under PMAY (Pradhan Mantri Awas Yojana). More money available in banks at a lower cost will result in increased purchasing power as there will be a lower EMI burden on the buyers. It will also lighten the liquidity crunch and lower the cost of finance for the developers.

Ashish Bhutani, CEO, Bhutani Infra
It is a good move by the RBI to cut repo rate and it is commendable that it is doing its part to accelerate the economy. However, the banks have not yet passed on the benefits to the consumers, which is not benefitting the real estate sector that in turn is affecting the allied industries too. For example, the cement industry is one of the eight core industries that have decelerated sharply as it was noted in the RBI's second bi-monthly monetary policy review of the ongoing fiscal. In the commercial sector, the coming up of REITs has to be backed by favourable bank rates to the buyers and if it is not happening now, even after the third cut this year, the situation might not look very promising. RBI should take action so that banks pass on the benefits to the buyers. Liquidity crisis has to be tackled soon as situation after NBFC crisis is dismal; this cannot happen until and unless banks take a firm decision to back the sector that has many allied industries attached to it.

Mani Rangarajan, Group COO, Housing.com/Makaan.com/PropTiger.com
The third consecutive repo rate cut from the RBI is in lines with the expectations. We hope that the reduction is passed on by the banks to the home buyers. Lower interest rates, along with the recent reduction in GST rates for under construction properties, should provide the fillip to end-user demand.

Deepak Kapoor, Director, Gulshan Homz & Former, President, CREDAI Western UP
With RBI reducing the repo rate back to back this financial year, shows a softer stand towards lending. I am sure Bank’s would surely reduce the lending rates, though marginally, which can boost the sentiments in the market. Also with the push which the government showed towards affordable segment in the budget 2019 where the income tax rebate was extended to Rs 5 lakh, I am sure to end users would now be more motivated, to purchase their homes, post the repo rate cut.

Vaibhav Jain, CMD, Rise Group
The 25 basis point cut in policy rates is on the expected lines. With inflation remaining as per the RBI target and GDP growth falling to below 6% during Q4, a rate cut was on the cards. The fact that the apex bank has changed its stance from neutral to accommodative is a welcome step. We are hopeful that the third successive rate cut will provide a much-needed impetus to the economy and real estate sector in particular provided commercial banks pass on the benefits to end users.

Uddhav  Poddar, Director  & CEO Bhumika Group
Reduction of the repo rate by RBI is a welcome move. It would boost the sentiments in the real estate market. This along with the rebates offered by the government towards affordable housing segment in the budget 2019, we expect end users would be motivated to invest in real estate, especially post this repo rate cut.

Rajat Goel, Joint Managing Director, MRG World
The third successive cut in the policy rates is a welcome step. This should benefit the economy as a whole as well as the real estate industry, which is one of the biggest employment generators in the country. The whole financial system, particularly the NBFC sector is facing some stress. In the absence of bank financing, it is the NBFCs which have accounted for a large share of funding to the realty sector. It would have been apt for the apex bank to announce some measures to reduce the stress on NBFCs, which is vital for the revival of the economy.

Kaushal Jain, MD, Arihant Group
The repo rate cut by RBI will aspire the real estate sector to pick up their businesses in the market. It will be a constructive progression for the sector and is counted on with the RBI policy rate cut by 25 bps. This step is highly expected to rejuvenate the real estate market as it will give assistance in taking down the marginal cost of fund based lending rates (MCLR) thereby bringing in more availability of money at the banks.

Harinder Singh Hora, Managing Director, Reach Group
The real estate segment is expected to pick up with RBI monetary policy's rate cut. The repo rate cut of 25 bases points will not only benefit the developers but will also favour the homebuyers. More money available in banks at a lower cost will result in increased purchasing power as there will be a lower EMI burden on the buyers. It will also lighten the liquidity crunch and lower the cost of finance for the developers. Such a positive announcement by the RBI was much needed for the realty sector to take off.

Amit Raheja, CMD, Wealth Clinic
This is really good news especially for home loan borrowers with the RBI bringing down the key policy rate by 25 bps in its monetary policy review, signalling lower interest rates. With lower repo rates banks would be able to set the direction and reduce the level of interest rates, which eventually witness the increase of demand for homes in the real estate sector. The year has been good so far with a lot of policy measures being taken by the authorities that will help the sector improve its standing.

Vikas Bhasin, CMD, Saya Group
This is surprisingly a good development -- three back to back repo rate cuts this year -- and indeed a step in the right direction. It will help to ease the pressure off the market by attracting more number of buyers to invest in the real estate sector. We also hope that with this announcement, the banks will immediately pass on the cut to the home buyers which will definitely boost the confidence of the customers.

Dhiraj Jain, Director, Mahagun Group
This is good news especially for home loan borrowers with the RBI bringing down the key policy rate for the 3rd time by 25 bps in its monetary policy review, signalling lower interest rates. With lower repo rates banks would be able to set the direction and reduce the level of interest rates, which will eventually witness the increase in demand for homes in the real estate sector. The year has been good so far with a lot of policy measures being taken by the authorities that will help the sector improve its standing.

Rajesh Goyal, MD RG Group and VP CREDAI NCR
The third consecutive rate cut of 25 basis points by RBI is a good development, since easing interest rate will help revive health of businesses like Real-Estate which are highly sensitive to interest rate movements, but while it is indeed a step in the right direction, there is definitely more requirement to improve the sentiment towards investments in the country. The back to back repo rate cuts will boost affordable and mid-segment housing sales.

Pankaj Jain, Managing Director, Realistic Realtors
We welcome the RBI’s decision to cut repo rate by 25 basis points to 5.75%. It is indeed a positive step to revive the demand in the real estate sector. It will allow the banks to pass the rate cut benefits on home and other loans to the customers. The step will increase lending as the EMIs will become cheaper and the real estate developers can witness steady growth in the sales of homes across different segments in the coming quarter.

Prateek Mittal, Executive Director, Sushma Group
The back to back rate cut of 25 basis points in this calendar year by  RBI in its monetary policy shows a softer side towards lending. It would for sure provide relief to the borrowers and will provide a boost to the real estate segment. With lower repo rates banks would be able to set the direction and reduce the level of interest rates, which eventually will witness the increase of demand for homes in the real estate sector. The reduction in repo rate will help the borrowers of big-ticket loans like home loans which will certainly lead to the increased demand for homes.

LC Mittal, Director, Motia Group
The Repo rate cut for the 3rd time in a row in this year aims to provide greater relief to the real estate sector. The reduction by 25 basis points will ease the pressure off the market and accelerate the investment cycle. Post implementation of GST & RERA real estate sector is on the revival path and decreased repo rate will be additional support for the buyers.

Ashok Gupta, CMD, Ajnara India Limited
As Expected, RBI cuts rates by 25 bps and keeping the stance neutral. The third consecutive rate cut would provide relief to the borrowers and will provide a boost to the real estate segment.  It will also accentuate the recent softness in momentum in the domestic economy.  Now it is the responsibility of Banks to pass on the benefits to home buyers.

Sagar Saxena, Project Head, Spectrum Metro
The 25 basis point policy rate cut is anticipated to rejuvenate the real estate market as this step will give assistance in lowering the marginal cost of fund based lending rates (MCLR) thereby bringing in more availability of money at the banks. The RBI Policy rate cut will not only benefit the developers but also will favour the homebuyers by lowering the EMI burden.

Harvinder Singh Sikka, MD, Sikka Group
The 25bps cut is in line with our expectation which will aid the RBI to boost the liquidity in the system. Developers are working hard to bring the real estate back on track and Government is also supporting us in every possible way. This move will prove beneficial from a consumption and lending perspective, thereby boosting economic growth.

Dhiraj Bora, General Manager, Corporate Communication, Paramount Group
This is a good development, since easing interest rate will help revive the health of businesses like Real-Estate which are highly sensitive to interest rate movements, but while it is indeed a step in the right direction, there is definitely more required to improve the sentiment towards investments in the country. The back to back repo rate cuts will boost affordable and mid-segment housing sales.

Kushagr Ansal, Director Ansal Housing & President CFREDAI Haryana
A constructive progression for the real estate sector is counted on with the RBI policy rate cut by 25 basis points. This is surely going to boost the market as this is the third time in FY 2018-19 that the rates have been cut by 25 bps changing the reserve repo rate at 5.75%. The marginal cost of fund based lending rates are expected to be low which in turn infers the availability of more money the banks thereby benefiting both the end-users and the developers.

Udaya Kumar Hebbar, Managing Director and CEO of CreditAccess Grameen Koota
“We welcome RBI’s decision to cut the repo rate by 25bps, which is in the expected lines. The measures introduced will be a stimulus for improving investment and will boost capex, supported by conducive inflation environment. We expect the economic expansion to bolster starting this quarter as liquidity will improve and credit offtake will improve its pace.

Umesh Mehta, Head of Research, Samco Securities 
This is the third consecutive time that RBI has cut rates by 25bps which shows that they are indeed taking care of the slowing growth and as expected are being supportive by loosening their purse. Indian economy has been experiencing a slowdown with unemployment at 45-year highs, CPI inflation excluding food and fuel down to 4.5% in April from 5.1% in March and a revision by the RBI on the GDP for FY20 from 7.2% to 7% indicates just that.  This is positive for the Street, however, as the rate cut was in-line with expectations which had already been factored in, the indices did not cheer the rate cut and continued to trickle down. If the international trade tensions continue to escalate further, the Fed might cut rates which will further create room for RBI to reduce rates in future. 

Vasu Ramaswami, COO, Muthoot Fincorp
The latest rate drop should help in improving consumption demand, particularly for the common man, especially once banks decide to pass this rate change to their customers. For the NBFC sector, which has been under some level of tightened liquidity conditions, this should also help in accessing more funds at a cheaper rate, which would eventually help in providing timely credit to millions of their small customers.

Kunal Shah, CFA, Fund Manager - Debt, Kotak Mahindra Life Insurance Co. Limited
MPC members decided to cut rates by 25bps as expected by market participants and surprisingly there was a unanimous vote to change the stance to accommodative. The shift of entire MPC surprised the market positively and yields on government bonds dropped to 6.90% from 7.00%.

MPC has revised down its inflation projection to 3.45% from 3.60% for FY 2019 and on GDP growth to 7% from 7.2% in the previous policy. With the level of inflation projections and accommodative stance, we see the definite possibility of one more cut with chances of another if the monsoon is normal and crude oil prices are below $70.

RBI has decided to constitute an Internal Working Group to review the existing liquidity management framework and suggest measures, the report will be released by mid-July. On the bond market front, the yield drop continues with more visibility of further easing, markets will also be watchful of panel suggestion on RBI’s economic capital. We see 10y GOI to trade in the range of 6.70-7.00% in the near term.

Rajiv Sabharwal, MD and CEO, Tata Capital
The 25 bps rate cut and the shift to an accommodative stance will provide further stimulus for growth. The inflationary trends remain moderate and in the RBI’s comfort zone. Fed’s policy stance and softening of treasury yields will continue to support the FII inflow momentum. The proposed comprehensive review for Money Market products will further strengthen the financial sector. The regulator has demonstrated its commitment to provide systemic liquidity through various tools that are available at its disposal. To achieve a sustained growth, there is also a need for a more efficient rate transmission framework.

B Prasanna, Group Head – Global Markets – Sales, Trading and Research, ICICI Bank
The policy was very positive and was reinforced by unanimous voting and the change in stance to accommodative. The statement’s focus on supporting growth and bolstering private investment as long as inflation remains within the mandate, is also encouraging and leads us to believe that more accommodation is on the cards. Our own expectations for growth and inflation for FY20 also underscore this view as we expect headline inflation to average under 4% and have revised our growth forecasts lower. The internal committee for liquidity framework is a welcome step. It will help to reduce the information asymmetry regarding systemic liquidity and will benefit not only markets but also banking decisions as regards, deposit taking, lending and transmission. Further, in light of the recent upheavals in the NBFC space, the Governor’s statement that all necessary steps would be taken to maintain financial stability is reassuring.

Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mahindra Asset Management Company
The cut in repos rate was broadly in line with expectations. The shift in gear from neutral to accommodative removes ambiguity wrt the direction of rate action. The growth focus, without losing sight of inflation seems to have prompted this move. Liquidity in the banking system has seen a movement from deficit to positive zone. It is important to see this situation continues to ensure credit transmission.  India rates would continue to find anchor and maintain a softening bias going forward.

Mandar Agashe, Founder and Vice President, Sarvatra Technologies
“With the waiver of charges on payment modes like RTGS and NEFT, RBI is clearly nudging the banks towards increasing digital payments. This move will specially benefit the small traders who deal in small value transactions and operates on small margins and for whom every penny counts. So this is actually a great move for the masses and will go a long way in encouraging digitization of payments and enhancing financial inclusion. Moreover, RTGS and NEFT are much cheaper modes than other payment mechanisms like Cheques in terms of the cost involved in managing end to end transactions until settlement. This move will therefore benefit banks and the entire ecosystem by encouraging more volumes.”

Raman Kumar--- Chairman and Founder of CASHe
The interest rates are amongst the highest in the emerging economies. The reduction in repo rate by 25 bps will directly bring down the rate of EMI which means consumers can now avail home, auto and other loans at much cheaper rates. This will encourage lending and credit thereby boosting the overall economic growth.  This is the third straight interest-rate cut which will largely ease liquidity and nurture the investment cycle. This will also revitalize consumption, enhance demand and exports besides resolving the ongoing liquidity issues in the financial sector. Besides, the waiver on RTGS and NEFT charges will further promote digital transactions. We are looking forward to a strong growth momentum in the coming fiscal which will be backed by robust investments by the government.

Gaurav Chopra, Founder & CEO, IndiaLends
RBI’s decision to reduce repo rate by 25 basis points to 5.75%, augurs well with the retail lending sector. Amidst global uncertainty, subdued domestic industrial activity & CPI within RBI’s comfort zone of 4% within a band of + or – 2%, this anticipated reduction is a welcome move.
This rate cut will cause a rise in the overall investment demand and improve credit environment of the economy. The reduction will give an extra room for the retail loans to become cheaper as this will cause the current cost for lenders to go down along with a possible chance of tenure reduction for old customers. If the eventual lending rates get lower, we can expect a slight motivation from end consumers to borrow more. Additionally, the decision to eliminate charges on fund transfers through RTGS and NEFT routes will provide the necessary impetus to digital fund movements.”

Vinay Bagri, Co-founder & CEO, NiYO
RBI's decision to accept small finance bank applications on-tap is a much anticipated and welcome move as the current SFBs have been doing a commendable job on achieving the goal of financial inclusion.  As a financial inclusion platform for the blue collared workforce in the country, NiYO wholeheartedly welcomes the move. RBI should also look at a new category of license for new age digital banks or ‘Neo-Banks’, which operate as a differentiated banking platform solving a particular part of the financial inclusion problem in a robust and efficient manner.

Amit Saxena, CEO & Managing Director, Unimoni India
The third consecutive rate cut by RBI is quite welcome by the industry as it will stimulate the economy post conclusion of general election. Further easing of liquidity is required to fuel growth of consumer goods and MSME sectors. Consumption of auto and white goods have slowed down in last few quarters. Small businesses are also affected due to working capital crunch. An easing of credit will grow the overall economy and also provide boost to job creation.

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