RBI MPC meeting Highlights: RBI Governor Shaktikanta Das has kept the repo rate unchanged once again in the latest monetary policy committee meeting. The stance is also kept unchanged in the meeting that concluded today. In another major announcement, the RBI Governor said that the Real Time Gross Settlement (RTGS) payment system will be available round the clock for 365 days. The latest move is likely to increase the ease of doing business as RTGS is used to transact a higher amount of money. While the central bank raised the retail portfolio limits of banks to Rs 7.5 cr in respect of fresh loans and qualifying exposure, it rationalised risk weights for all housing loans until 31 March 2022. The RBI expects that the economic recovery will be a 3-speed recovery, with variations across sectors. While manufacturing firms may see capacity utilisation in Q3, agri, consumer goods, power, and pharma sectors are likely to see quicker recovery, Shaktikanta Das added. Meanwhile, the RBI Governor said that the real GDP in the current fiscal year may contract by 9.5 per cent.
Highlights
With the ever-growing Covid-19 cases across the country the "V-shaped recovery" looks nothing short of a fairy tale and RBI should take industry-specific measures to address demands of the sectors that can help them sail through financial distress for the short to medium term. -- Ankit Shyamsukha, CEO, ICA Edu Skills
The linking of risk weightage only to Loan to Value (LTV) ratio vis-a-vis the earlier practice of risk weightage with both pricing and LTV augurs well for the sector particularly for high end properties which have been facing severe downward demand pressures. High value loans are expected to get cheaper with rationalisation of associated risk weightage. The increase of retail exposure from Rs 5 crore to Rs 7.5 crore will help individuals and small businesses alike and it would help the real estate sector in general. - Tanuj Shori, Chief Executive officer, Square Yards
The linking of risk weightage only to Loan to Value (LTV) ratio vis-a-vis the earlier practice of risk weightage with both pricing and LTV augurs well for the sector particularly for high end properties which have been facing severe downward demand pressures. High value loans are expected to get cheaper with rationalisation of associated risk weightage. The increase of retail exposure from Rs 5 crore to Rs 7.5 crore will help individuals and small businesses alike and it would help the real estate sector in general. - Tanuj Shori, Chief Executive officer, Square Yards
Right from increasing the quantum of OMO’s and announcing of OMO’s for SDL’s to liquidity and credit push measures in terms of TLTRO’s, extension of HTM window, rationalising the risk weights on Home loans to LTV’s, and increasing the retail exposure; all will go a long way in assuaging the stress of liquidity strapped sectors and encouraging credit growth in the system. RBI has lived up to the “whatever it takes” statement to support growth. The growth optimism in the policy is quite palpable and should provide a lot of comfort to the markets - Jyoti Vaswani, CIO, Future Generali India Life Insurance Co Ltd.
Rationalisation of risk weight of housing loans is a welcome step by the RBI that could potentially boost housing demand across the country. With this move, housing loans would eventually get more affordable, thereby benefiting the homebuyers in this sluggish market. In fact, home loan EMIs are at an all-time low and reduction in stamp duties across major cities augurs well for the residential segment - Anurag Mathur, CEO, Savills India
Regulatory measures such as tweaks on risk weights for home loans aligning it to only the LTV’s, increase of exposure limits to individual retail and small business loans and extension of co-origination models to cover all NBFCs and HFCs will help the sector - Siddhartha Mohanty, MD & CEO of LIC HFL
Shaktikanta Das said that the contraction in economic growth witnessed in the April-June quarter of the fiscal is “behind us” and silver linings are visible, and higlighted the uptick in manufacturing sector, and energy consumption, among others. Read full story here
In a continuing effort to provide liquidity support to various economic sectors and banks, RBI Governor Shaktikanta Das today announced an ‘On Tap TLTRO’ scheme worth Rs 1 lakh crore. The focus of liquidity measures by the RBI will now include the revival of activity in specific sectors that have both backward and forward linkages and multiplier effects on growth, RBI added. Read full story here
The inflation trajectory is expected to mellow down with green shoots appearing and we can expect a rate cut due course over the next two quarters with gradual improvement in the economy for which RBI has indicated sector-specific 3-speed recovery - Jyoti Prakash Gadia, Managing Director, Resurgent India
The real estate sector was expecting a rate cut which would give further impetus to demand and induce liquidity in the market. However, the RBI has reiterated its decision to keep the repo rate unchanged to achieve sustainable growth of the economy and its determination for control over inflation. - Ram Raheja, Director, S Raheja Realty
The overall sentiment in the market is gaining momentum as people have started to move forward from the hangover of the economic crisis resulting from the COVID 19 pandemic. A rate cut would have been beneficial for the consumers and added further impetuous to the already upward swing in sentiment and spending. However, the central bank rationalizing risk weights for all new housing loans till March 31, 2022 and extending a scheme for co-lending to all NBFC and HFCs is definitely an encouraging step for the sector since it will help buyers make an informed decision.- Farshid Cooper, MD, Spenta Corporation
The easing of contraction in the Indian economy from here on will be critical to keeping the GDP decline below 9.5%. COVD-19 recoveries have been increasing and the pandemic situation is expected to be under much better control by the end of 2020. The rural economy is likely to lead the recovery supported by a good monsoon and high crop production. - Mohit Ralhan, Managing Partner & CIO, TIW Private Equity
Further reduction in key interest rates was not a possibility at this juncture. The RBI’s decision to extend the scheme for co-lending to all NBFCs, HFC in respect of all eligible priority sector loans will allow greater operational flexibility to the lending institutions and is much welcomed,” he said - Niranjan Hiranandani, President, ASSOCHAM
There is optimism in the governor’s statement who is expecting a revival of the Indian economy earlier than expected by most. We echo the RBI sentiments of an early and measured recovery of the economy. The growth in the economy has also been reflected in the real estate activities of the last quarter where both residential, as well as commercial markets, have seen a sharp increase in activities. - Shishir Baijal, Chairman & Managing Director, Knight Frank India.
The Monetary Policy announcement is overall positive and growth oriented. The RBI Governor has rightly mentioned that focus must be on reviving the economy. Accordingly, The Accommodative stance was as expected. The RBI's assurance on maintaining comfortable liquidity conditions will assure the markets, at the same time enable the Government to go ahead with its borrowing programme smoothly - Padmaja Chunduru, MD&CEO, Indian Bank
Boosted by TLTROs, non-SLR investments of banks (comprising investments in CPs, bonds, debentures and shares of public and private corporates) increased by 1.8 per cent in H1:2020-21 as against a decline of 3.9 per cent in H1:2019-20.
The probability of RBI cutting rates in the near future remains quite low in view of the higher inflationary pressures. RBI views the current spike in prices a "transient hump", as price level may moderate in Q4. But, with a huge government borrowing program ahead, the RBI will continue with the liquidity support. It is actually the liquidity that has been helping both the debt and the equity markets. - Joseph Thomas, Head of Research - Emkay Wealth Management
The RBI’s stance to rationalize risk weightage on home loans is a welcome move. With all new housing loan risk now linked only to loan to the value, the rates will continue to be in check and hence encourage new buyers. The lower margin requirement on high value loans will boost demand for properties in metros, where the property prices are higher than other cities - Ravindra Sudhalkar, CEO at Reliance Home Finance
As the Covid 19 situation has altered our way of living, this festive season is opportune for investors to look at Goa seriously for a second-home investment and destination for luxury homes. As a premium real estate developer and catering to the elite segment, we remain optimistic for this season too. We have already witnessed an increase in the number of enquiries for our luxury villas and properties in Goa that offer safety, privacy, and luxury, all in one space. - Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group.
Any further rate cut at this point of time would have definitely added to the positive sentiment, however, at the same time, it is imperative for banks to reduce lending rates as this is the need of the hour to further see a boost in the real estate sector. - Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group.
Several regulatory measures such as tweaks on risk weights for home loans with higher equity contribution, an increase of exposure limits to individual retail and small business loans and extension of co-origination models to cover all NBFCs and HFCs will help to incentivise higher lending to retail and SME sectors, thereby pushing the currently low credit growth - Suman Chowdhury, Acuité Ratings & Research Ltd.
“On expected lines, MPC has continued with its pause stance while stating clearly that it will continue with the accommodative approach well into the next financial year given the significant uncertainty on the growth revival trajectory. Although RBI has highlighted some of the emerging green shoots in the economic landscape including a record agricultural output in the current kharif season, it has also for the first time in the current year has projected a GDP contraction of 9.5%," said Suman Chowdhury, Acuité Ratings & Research Ltd
RBI has been proactive in meeting the demands of the economy. While the interest moratorium saga continues to play out in the courts, the continuing reliefs by RBI will certainly ease short term liquidity pressures. - Veena Sivaramakrishnan, Partner, Shardul Amarchand Mangaldas & Co
For the first time since COVID, the Governor’s statement has a sense of tides turning. While the real impact is yet to be seen, the “on tap” TLTRO and easing of contraction in certain sectors seem to indicate “winds of change”. - Veena Sivaramakrishnan, Partner, Shardul Amarchand Mangaldas & Co.
The rural economy, especially the Agri sector, thankfully is continuing its good run giving some respite to all the stakeholders including the Government. Q4 would be the period to watch out for and the Government & RBI should gear up to provide all the support during that period. In the next review meet as well, no change can be expected unless there is a drastic change in the ground situation, especially on the inflation front. - Divakar Vijayasarathy, Founder & Managing Partner, DVS Advisors LLP.
it is most certain that even in the next bi-monthly review as well the same rates would be retained. Further on the recovery front, amidst various theories of V, L, W & K, RBI has aptly stayed away from such theories and has stated that it would be three paced sector-specific recovery. Amidst all the talk of optimism, RBI Governor spelt out the real GDP to contract by nearly 9.5% which reflects the ground scenario. In spite of very high contraction expectations, RBI Governor also highlighted many silver linings in the economy which gives hope for a better Q4 and FY 21-22. - Divakar Vijayasarathy, Founder & Managing Partner, DVS Advisors LLP.
Looking ahead, three months ahead median inflation expectations of urban households fell by 10 bps in the September 2020 round of the Reserve Bank’s survey while one year ahead median inflation expectations remained unchanged.
Doing OMOs of state govt bonds is a brave approach to manage borrowing, said Governor Das.
Retail portfolio limits of banks increased to Rs 7.5 cr in respect of fresh loans and qualifying exposure, said Shaktikanta Das
The central bank announced to rationalise risk weights for all housing loans until 31 March 2022.
RBI expects the economic recovery to be 3-speed recovery, with variations across sectors. While manufacturing firms may see capacity utilisation in Q3, agri, consumer goods, power, and pharma sectors are likely to see quicker recovery.
'There Is A Turn In The Wind, Not Imprudent To Dream', said RBI Governor citing easing of contraction in various sectors of the economy
It has been decided to make available RTGS system 24*7 for 365 days. Shaktikanta Das said that the move will increase ease of doing business.
RBI Governor said that he is ready to undertake steps as necessary of access to liquidity, and easy fin conditions.
GDP growth may break out of contraction and turn positive by Q4, said Shaktikanta Das
RBI to maintain comfortable liquidity position; Rs 20,000 crore-OMO auction next week, said Governor Shaktikanta Das.
RBI announced on-tap TLTRO with tenure of up to 3 years with the total amount of Rs 1 lakh crore. The scheme will be linked to the policy repo rate. Corporate bonds, commercial paper and non-convertible debentures will be used to avail this scheme. The liquidity availed under this scheme can be used to extend loans to certain sectors.
Notification for OMO purchase of Rs 20,000 crore will be issued after Shaktikanta Das' address.
Inflation is likely to ease to the projected target by Q4 of the current fiscal year FY 2020-21: RBI Governor
Real GDP may contract by 9.5 per cent in FY 2020-21, with risk tilted towards downside: RBI Governor.