RBI rate cut - the industry reacts- Business News
facebooktwitter
Loading...

RBI rate cut - the industry reacts

The much awaited news about RBI's rate cut has triggered mixed reactions from industry experts.

  Jinsy Mathew  
  • September 29, 2015  
  • |  
  • UPDATED   17:36 IST

The RBI cut the repo rate by 50 bps today. This has triggered interesting reactions from some leading members across the banking, insurance, construction and financial sector. Read on to find out what experts have to say about Raghuram Rajan's move. 

S Naren, CIO, ICICI Prudential AMC

"We believe there was substantial scope for interest rates to come down in India as a result of developments in commodities prices across the world. Hence, a 50 bps rate cut is a step in the right direction to improve the long-term growth of the economy. Going forward the key factors required for driving growth would be Goods and Services Tax (GST), resolution of Nonperforming loans (NPL) problems and ease of doing business. Over a period of time, we expect further moderation in interest rates from current levels and investors should continue to invest in duration with an aim to benefit from the same. On the equity side, as long as emerging market redemptions continue, Indian equities present a good investment opportunity; the fact that Foreign Institutional Investors (FIIs) are selling is a strong positive for investors to consider investing for the long term. "

Jyoti Vaswani, Chief Investment Officer, Future Generali Life Insurance

"Repo rate cut of 50 bps by RBI is a positive surprise. On the back of a slowing private investment, RBI has delivered what industry wanted with an aggressive rate cut. Also, more importantly RBI will continue its accommodative stance and work with Government towards transmission of bulk of the 125 bps cut which augurs well for revival of capex cycle. The increase in the FPI limit for investment in central govt. securities and introduction of a separate limit for SDLs would go a long way in ensuring increased FII participation in the Indian Debt markets. It also indicates RBI's comfort with the improving macro-economic scenario in India.Today's policy actions should be accepted positively by both equity and debt markets."

Dr. Sunil Sinha, Principal Economist, India Ratings and Research

"The rate cut by the RBI is on expected lines. RBI action is based on its belief that (i) despite CPI inflation rising over the next few months due to the reversal of base effect, it will remain well within its comfort zone, (ii) despite less than normal monsoon rainfall, risk from food inflation appears to be contained. However, the tepid global demand, soft commodity prices coupled with postponement of policy normalisation by the Fed provided RBI additional head room, and in stead of 25 bp cut it went for 50bp rate cut. Today's action by RBI shows that if conditions permit RBI's policy stance will continue to be accommodative".  

A. K. Sridhar- Director and CIO IndiaFirst Life Insurance

"The reduction of 50 bps of REPO rate is really a surprise move by RBI. The market will see a rally but it might also increase the volatility of debt markets in the next three months. We do not expect the reduction to be 'passed on' by the banks fully. High interest rates offered on small savings (by Post Offices) will subsequently come in the way of banks to reduce the interest rates."

Dilip Bhat, Joint MD, Prabhudas Lilladher

"Today's move by the RBI was much above the expectations and was more front ended, due to the slow growth of domestic economy and the challenges and headwinds faced by global economy. The bigger cut also highlights the RBIs concern on the underlying growth momentum."

Dinesh Thakkar, CMD, Angel Broking

"The Policy - 50 bps cut in repo rate - has come as a positive surprise to the markets.In our view, even if the US Federal Reserve were to hike rates later this year, there is enough head room for the RBI to remain accommodative as structural factors driving inflation in India has abated and global deflationary forces remain strong. Overall, we continue to expect the downward bias in interest rates in India to continue, which should act as one of the catalysts for investment revival, going hand-in-hand with favourable government measures."

Brotin Banerjee, CEO and MD, Tata Housing Development Company

"With festive season around the corner,  this was the perfect time for the RBI Governor to announce the rate cut of this magnitude. The cumulative cut of 125 basis points since January this year will give a very good push in improving both the consumer sentiment and the real estate. Cheaper low value housing loans will also help in augmenting the affordable housing segment. However, it is important that the banks translate the rate cuts into lower lending rates so that consumers can leverage the true benefits of the announcement."

Rajesh Prajapati, MD, Prajapati Constructions

"This is a much needed rate cut and comes at a perfect time. the hope now is that banks will pass on the benefit to customers immediately, given that the festive season of Dussehra and Diwali is just round the corenr. We are sure such a move by the banks will stimulate demand for housing as EMI's will come down. Also, we hail the reduction of risk weightage to housing sector which has been a long pending demand from the industry" 

Deepak Joshi, President and Chief Business Officer- Religare Affordable Housing Business

"The repo rate cut by the RBI comes as a great pre Diwali bonanza to all home buyers and hopefully should trigger positive sentiments for the Industry. The timing too is good as developers await the festival season for new launches. This could bring some relief and light to the industry. Specifically we do expect the affordable housing segment being impacted positively . This rate cut coupled with the interest subsidy scheme announced under the Pradhan Mantri Awas Yojna Mission Housing for all 2022, will see the affordability quotient further going up for the EWS and LIG consumer segments."

Sanjay Dutt, Managing Director, India, Cushman & Wakefield

"The Reserve Bank of India's (RBI) decision to cut interest rates by 50 basis points amidst stable inflation indicators, augers well for steady economic growth and is expected to bolster investment demand. With the latest interest revision, the RBI has cut repo rate by a total of 125 basis points this year to a four-year low that should act as a catalyst to revive sentiments in the real estate sector. At a time when Indian cities are witnessing subdued housing sales, this correction in prime lending rates would help stimulate home buyers' interest and spur home-buying decisions. Although demand from end-users may take a bit longer to transform to active buying, buyer inquiries may increase in the short-term in expectation of lenders passing on the benefits of reduced interest rates. However, the extent to which lenders pass on the benefits to customers would determine the actual magnitude of increased housing sales. On the developers' part, the cost of borrowing could also decrease marginally, who have been reeling under high funding cost and increasing costs of construction."

Sunil Kanoria, Vice Chairman, Srei Infrastructure Finance 

"With CPI and WPI numbers very much within comfort zone and industrial growth not picking up, RBI's 50 bps cut in policy rate is a decisive pro-growth move and is welcomed. There is still an air of uncertainty on both external and domestic fronts. The timing of a Fed rate hike and how global economy will react to it, still remain unknown. How the monsoons will influence India's inflation levels, will be realized only with a lag. Hopefully, this is the beginning of a series of rate cuts by RBI. However, rate cuts by RBI need to be supplemented by administrative reforms by the government to restart the growth cycle."