PUNE: Experts have pointed that the move by the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) to keep the repo rates unchanged on Thursday would help in reviving growth in the country.
As per a press release by the RBI, the policy repo rate under the liquidity adjustment facility (LAF) remains unchanged at 5.15 per cent and the reverse repo rate under the LAF remains unchanged at 4.90 per cent.
Economist, ICICI Securities, Anagha Deodhar, said the high retail inflation forced the MPC to hold repo rate. “However, the RBI used other instruments to boost growth. Firstly, the RBI announced long term repos in the 1 to 3 year window up to Rs 1 trn. This led to short-term yields falling by 15-20 bps and it was as good as a rate cut. Secondly, it announced that banks won’t have to include incremental loans to auto, housing and MSME sectors during January to July 2020 in their NDTL for CRR calculation. These measures are like a stimulus for the economy although the repo rate was kept unchanged.”
CEO and Country Head, JLL India, Ramesh Nair said the move by RBI maintained its accommodative stance in the backdrop of relatively high inflation levels and recent fiscal measures. “The real estate sector showed resilience with the residential sector across the top seven cities recording a growth of 6 per cent year-on-year in the number of units sold in 2019, in spite of muted consumption trends. The government’s focus on affordable housing through measures like extension of tax holiday and benefit under section 80 EEA is expected to have an impact on home buyers’ sentiment,” he added.
Managing Director and CEO, Bank of India AK Das said, “Introduction of Term Repo opens up ways to transmit the signal rate changes. Measures like DCCO extension for realty, MSME window expansion for restructuring and CRR exemption for incremental funding to key segments are growth oriented and promise to provide impetus to bank lending. As such, markets have given a thumbs up to the new initiatives.”
Chief Economist, Yes Bank, Shubhada Rao, said, “RBI’s final monetary policy review for FY20 was well in line with expectation, viz. maintaining a status quo on policy rates while maintaining an accommodative stance. Going forward, the near term outlook for inflation remains worrying led by protein-items inflation and price pressures emanating from services sector. The growth inflation dynamic is likely to improve towards Q3FY21. This is in line with our own expectation. Furthermore for housing and automobile sectors incremental bank credit has been incentivized. This bodes well for overall improvement in credit appetite.”
Chairman and CEO India, South East Asia, Middle East & Africa at CBRE Anshuman Magazine said the decision could be attributed to green shoots of economic recovery in the form of improved index of industrial production and core sector performance.
Director and Chief Investment Officer, Max Life Insurance, Mihir Vora, said the decision was in line with market expectations.
“This is growth-supportive and will be taken positively by the debt and equity markets. The CPI inflation projection is revised upwards by 120-140 bps for the first half of the next financial year, factoring in the uncertainty in food and fuel prices, higher costs and elevated inflation expectations. RBI acknowledged the growth slowdown and projected GDP growth of 6 per cent for FY21, higher than the 5 per cent expected in FY20,” added Vora.