Market welcomes RBI's decision to cut repo rate by 25 bps
Mumbai, Jun 6 (IBNS): The Reserve Bank of India (RBI)'s decision to cut the repo rate by 25 basis points (bps) has received a good response from the market.
B Prasanna, Group Head – Global Markets – Sales, Trading and Research, ICICI Bank, said: "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 FY2020 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.”
Shishir Baijal, Chairman & Managing Director, Knight Frank India, said: “The first rate cut in the newly elected government’s regime is certainly a welcome step, especially for the real estate sector. The benefit of lower policy rate in terms of better credit cost as well as higher liquidity will hopefully be transmitted further by banks to NBFCs as well as home buyers. Also, the change in policy stance from neutral to accommodative is a welcome shift as it lays ground for further rate cuts.
The cash-crunched NBFCs will definitely benefit from inflow of capital which will in turn benefit developers as well as home-buyers. NBFCs have been facing a liquidity crisis and this has negatively impacted their loans to real estate, including construction finance. Besides capital infusion into this important financier segment, this rate cut will also improve the home-buyers affordability and stimulate housing demand at this critical juncture.”
"The RBI’s decision to cut the Repo rate is expected to marginally boost the liquidity in the economy. Moreover, this rate cut will lead to easy access of funds to the real estate developers and lower interest rates on Home Loans. However, the actual effect of this rate cut would be observed once the benefit of the cut is passed on to the consumers," said Samir Jasuja ,CEO and Founder PropEquity
“The RBI’s decision to cut repo rate by 25 basis points to 5.75% is a welcome step and would definitely prove beneficial for the real estate sector as it paves way for increased investments. The change in stance of the RBI from “Neutral" to "Accommodative" is expected to help the economy revive its growth rate that softened in the last quarter of FY19. With the formation of a stable government, the upcoming Budget in July is expected to bring the Indian economy to a global forefront," said Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Limited and Tata Housing Development Company.
Zarin Daruwala, CEO, Standard Chartered Bank, India, said: “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.”
Khushru Jijina, MD, Piramal Capital and Housing Finance, said: “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 hires 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.”
Reserve Bank of India (RBI) on Thursday cut the repo rate by 25 bps to 5.75 per cent with an immediate effect in its second bi-monthly monetary policy, RBI Governor Shaktikanta Das said.
This was the third straight interest rate cut by the country’s central bank.
Consequently, reverse repo rate stands at 5.50 per cent.
The stance of the policy was changed to accommodative from neutral.
The RBI was widely expected to go for an interest rate cut amid dismal gross domestic product (GDP) growth, subdued investment and slowdown in consumption space.
All the six members voted in favour of a 25 bps rate cut.
The committee has kept cash reserve ratio (CRR) unchanged at 4 per cent.
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