RBI to maintain status quo on key lending rates: Industry Reactions 

Dharmakirti Joshi, Chief Economist, CRISIL
“Unsurprisingly, the Monetary Policy Committee of the Reserve Bank of India (RBI) maintained status quo on rates and stance.
The RBI’s GDP growth forecast for this fiscal was revised up to 7.0% from 6.5% in view of the better-than-expected rise in the July-September quarter.
Although the repo rate has been left unchanged, there could be de facto tightening as the RBI may continue to use liquidity compression as and when needed to speed up transmission and rely on macro prudential measures to manage risks to financial stability.
The recently raised risk weights for unsecured, credit card and non-bank lending will crank up capital requirements of financiers and put pressure on lending rates. Additional announcements today for connected lending and digital lending underscores RBI’s vigil on buoyant credit growth.
This fiscal began with a pause on rates and stance and will end the same way. We expect rate cuts only in the first quarter of the next fiscal.”

Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani
“The committee's decision to maintain the current repo rate is a prudent move for the real estate market. The Monetary Policy Committee's acknowledgment of controlled inflation fosters optimism among potential homeowners, contributing to the positive outlook for the industry. This decision, paired with the festive season, boosted the ongoing upward trend in the Indian real estate market.

Furthermore, the committee's decision aligns with broader economic goals, as a stable repo rate not only supports the real estate sector but also promotes overall economic stability. The equilibrium in lending rates encourages financial institutions to extend credit more readily, facilitating increased accessibility for potential homebuyers.

In addition, the positive sentiment generated by the maintained repo rate is likely to attract foreign and domestic investments in the real estate market. Investors tend to favor markets with consistent and predictable monetary policies, and the committee's prudent move enhances the attractiveness of the Indian real estate landscape.”

 

Umesh Revankar, Executive Vice Chairman, Shriram Finance
“While headline inflation has moderated over the last quarter, it still remains above target, testifying to its stickiness. Expectedly, the MPC has once again decided to retain policy rates at earlier levels and continued to withdraw accommodation.
While geo-political hostility worldwide continues to be a challenge, the softening of crude prices is a happy omen. Despite global trade remaining subdued, India’s domestic economic activity has shown remarkable resilience, as evidenced by the 7.6% growth rate in GDP for Q2. The increase in Government’s investments spending, the revival in rural consumption and the strong growth in infrastructure and manufacturing sectors along with improved consumption numbers, are promising signs that we may be nearing the end of the inflationary tunnel. I believe a regime of reduced rates is just around the corner.
Some steps on the anvil as announced by the Governor, including a repository for Fintechs, and a regulatory framework for loan web aggregation and connected lending are progressive steps. It can dispel the dark clouds of suspicion hanging over digital lending in recent times. We see great promise for buoyant economic activity and consequently, growth in commercial and retail credit in the near future.”

Susheel Tejuja - Founder & Managing Director at PolicyBoss
"Today, insurance commissions have been fairly simplified, thanks to EOM guidelines brought in by the regulator earlier this year. Post these guidelines coming into effect, all insurers have by and large streamlined and aligned to the new way of life and hence there is no shade of gray on this subject.
Malpractices as one mentioned by you have largely been put to check and if at all anyone still continues to do so, they would posing a big risk both personal and to the insurance company. Over time, all such malpractices will cease and it’s the policyholder who benefits from this all at the end of the day as their is greater transparency and clarity on making an informed insurance choice"

Rajiv Agarwal, MD & CEO, Essar Ports 
“The RBI's latest Monetary Policy, emphasises a cautious decision to maintain the policy repo rate at 6.50 percent. The upward revision of the real GDP growth forecast to 7 percent for 2023-24 from 6.5 percent shows the buoyancy in the Indian economy. With the taming of inflation we expect a reduction in the interest rates in the coming quarters which will further push the growth rate.”

Radhavi Deshpande, President & Chief Investment Officer, Kotak Mahindra Life Insurance Company Limited 
"Today’s Monetary Policy Committee (MPC) statement stays on expected lines keeping policy rates and stance unchanged, MPC highlights CPI target rate at 4% still to be achieved while revising GDP forecast higher. The MPC acknowledges the need to be vigilant of over tightening while closely watching and addressing the elevated volatility in food inflation.
Markets will continue to favour a longish pause with adequate liquidity for this financial year.  Worries around measures from RBI to address liquidity through OMO sales will come off. Markets to stay range bound while RBI stays global and domestic data dependent. We see 10-year G-Sec to remain in the range of 7.10-7.35%"

V. P. Nandakumar - Managing Director & CEO at Manappuram Finance
“The MPC’s decision on Friday (December 8) to keep the key policy rates steady while staying the course on monetary tightening is the best policy prescription that the central bank could deliver at this point of time.  The tightening cycle, in my view, will continue till the headline inflation returns to the below 4% mark.  For this to happen, we may have to wait for a few quarters more as food price inflation is listed as a major downward risk in the near term.  The point, however, to note here is that the past policy actions have started showing results as mirrored in the moderating core inflation print. As economic expansion gathers momentum with the apex bank projecting the real GDP growth at 7% for the current fiscal, a full 50 bps up from its earlier forecast, it is only prudential for the central bank to continue its disinflationary stance.  I don’t expect a rate cut on the RBI’s table any time soon”.

Pankaj Kalra, CEO, EOGEPL
“Today's decision by the Reserve Bank of India to maintain the status quo on key lending rates is a prudent move in the backdrop of India's accelerating GDP growth and manageable inflation. The anticipated GDP growth rates for the upcoming fiscal year signal positive momentum. Despite global uncertainties, the RBI's commitment to maintaining inflation projections provides a stable foundation for strategic planning within the industry. We remain vigilant to market dynamics and look forward to continued collaboration with stakeholders to foster sustainable growth in the sector.”

Kush, CEO, Essar Power 
“The RBI's strategic decision to keep the repo rate unchanged reflects a sound economic strategy amid dynamic global conditions. This consistent stance provides critical assistance for businesses and consumers, notably for the power sector as well. The positive GDP outlook and maintained inflation projections provide a foundation for confidence.”

Suresh Khatanhar, Deputy Managing Director, IDBI Bank
“The decision of the central bank to keep policy rates unchanged is in line with expectations. The Indian economy is showing resilience with GDP growth for Q2 having exceeded forecasts, which is a good sign of a sustainable growth momentum. As fundamentals of the economy remain strong with banks and corporates reporting healthier balance sheets and fiscal consolidation on course, the external balance with strong forex reserves provides a cushion against external shocks. A broad-based easing in core inflation certainly points towards past monetary actions yielding desired results. Domestic economic activity is holding up well as assessed by the RBI and the MPC remains alert and prepared to undertake appropriate policy actions as warranted – this provides a good sense of linear growth across sectors for the remaining part of the financial year.”

 

Rajesh Sharma, Managing Director - Capri Global Capital Limited 
“The Central Bank's decision to maintain the repo rate signals stability, providing a boost to the lending sector, especially in housing loans. With unchanged repo rates and a positive economic outlook in India, there is a favourable momentum in housing sales. The proposed enhancements, including the noteworthy upward revision of the UPI transaction limit for payments to hospitals and educational institutions from Rs.1 lakh to Rs.5 lakh, resonate with the dynamic needs of the economy. Additionally, the announcement of a dedicated cloud facility for the financial sector underscores the regulator's dedication to modernize and fortify the BFSI sector's data security and privacy. This proactive approach aligns with the regulator's commitment to foster transparency in the BFSI sector, ultimately contributing to a more secure and accountable financial landscape.”

 

P R Seshadari MD & CEO of South Indian Bank 
“As expected, The MPC has decided to keep the repo rate unchanged at 6.5% and SDF rate at 6.25%, and MSF rate & Bank rate at 6.75% respectively.
The recommendations are consistent with the MPC’s calibrated measures to rein in sticky inflation. Through the MPC actions, RBI has managed to keep the Indian economy resilient, that has translated into a growth momentum in an unsettled and gloomy global backdrop. The MPC team’s foresight in prioritising inflation control by draining out excess liquidity through measured rate hikes and pauses is commendable. It has worked well, alongside supply-side measures taken by the government, to tame stubborn inflation. Along with the rate hikes, the MPC also announced some additional measures. It will start allowing reversal of liquidity facilities under the Marginal Standing Facility and the Standing Deposit Facility even during weekends and holidays for better fund management. Also, it plans to increase the transactions limit to Rs 5 lakh for UPI payments to hospitals and educational institutions. These steps will accelerate the digital India movement and improve ease of conducting financial transactions. We are confident that the MPC’s announcements will help India achieve the targeted growth figures and bring down inflation to 4%.”
 

Kishore Lodha, Chief Financial Officer, U GRO Capital 
“The RBI has kept the rates unchanged, which is on expected lines, as inflation is moderating. Core inflation and food inflation – both are showing signs of moderation, and it was expected that rates would remain stable for some time. The RBI is very focused on bringing the inflation target down to 4%. Until that level is achieved, the RBI is likely to monitor inflation very closely and any interest rate movement will be dependent on inflation targets getting achieved. In other words, unless we achieve inflation target, it is possible that we won’t see rate cuts in the immediate future.
As a lender, we have to manage large volumes of data and despite several data security measures, are more vulnerable to cyber threats. RBI to set up a dedicated cloud facility for the financial sector is the need of the hour when most of the banks are already leveraging the cloud facilities to do the same. The Indian fintech space needs regulations and regulatory framework to innovate further.  The establishment of the Fintech repository by the RBI to combat the web aggregation issues, will further enhance the transparency in digital lending and fintech system.
On the growth front, the RBI has projected that the GDP growth will be 7% for FY23-24, which will be the highest growth among all major economies across the world. Another good sign is our overall economic size crossing 4 trillion USD last week, showing India’s rapidly increasing scale of economy.”

Ajit Banerjee, Chief Investment Officer, Shriram Life Insurance
“The Reserve Bank of India's (RBI) Monetary Policy Committee unanimously decided to keep the repo rate unchanged at 6.5% for the fifth time in a row which was in sync with the consensus view of the market. It was also widely assumed that rate-setting panel will also retain the policy stance unchanged with a focus on the withdrawal of accommodation.
From the RBI Governor's comments, it can be inferred that the MPC has drawn some comfort on the fact that there has been broad-based easing in core inflation, which also indicates that the RBI monetary policy action has been bearing results of successful disinflation. The Governor though has expressed concern on potential inflation risk which can emanate from food inflation which can lead to an uptick in inflation numbers of November and December.
The tone of the MPC seemed to be well-balanced between controlling inflation on the one hand and retaining the focus on it, while at the same time cautioning against the risk of over-tightening measures that may arise. From the Governor's statement, we feel that RBI MPC will pause on the rate front up to H1FY25, focussing on liquidity measurement management to ensure liquidity remains neutral to tight in the near term to align to policy stance.
RBI remains comfortable on the growth front and has revised FY24's real GDP growth at 7% against the previous projection of 6.5%. On the headline CPI inflation, it has maintained the same set of inflation projections at 5.4% for FY24.”