Reactions to second bimonthly RBI Policy announcement of FY2019-20

Author(s): 

"The second bimonthly RBI Policy announcement of FY2019-20 by RBI Governor Mr. Shaktikanta Das, slashing the repo rates by 25 bps to 5.75% is a welcome move says, Ms. Hiral Sheth - HOD, Marketing, Sheth Creators.
This is the third consecutive rate cut this year which will definitely help in bringing down the home loan interest rates and will also bring some amount of cheer to the homebuyers. As EMIs are likely to fall due to drop in interest rates, the demand for housing should rise and propel the growth of the industry. The real estate market is quite bullish with Modi 2.0 coming in action and will further boost sentiments of the buyers."
-Hiral Sheth - HOD, Marketing, Sheth Creators

"The hat-trick of the rate cut for the calendar year 2019 by RBI will have a positive impact on the Indian economy.
Presuming that the banks will extend the benefits to the customers which will lead to lower EMI and higher purchasing power capacity of the home buyers.
A stable government at the centre, declining interest rates along with new reduced GST rates collectively will encourage the buyers to buy their dream home."
-Rajat Rastogi - Executive Director, Runwal Group

"The RBI's decision on reducing repo rate by 25 basis points to 5.75 % will definitely make home loans cheaper and also increase liquidity in the banking system. RBI has given positive signs showing that the market is improving and finally the financial institutions can now start on to pass the benefits to the end-users. Stable Government, cheaper loans for home buyers and rising demand will create renewed interest in residential property purchase from end users.”
-Sarojini Ahuja - VP, Sales & Marketing, Transcon Triumph

"Drawing comfort from consistent softness in inflation trajectory, MPC cut policy repo rate for the third time this year to support benign growth conditions. A shift in the stance to accommodative is welcome as it will pave way for transmission to lending rates, which so far have been inadequate. We expect MPC to cut rates by an additional 50 bps through the year while continuing to fine-tune liquidity support through a combination of OMO purchases, forex swap and CRR cut."
-Garima Kapoor, Economist, Elara Capital

“The Reserve Bank of India’s decision to cut the repo rate by 25 basis points is a welcome one. This was expected, given the backdrop of low inflation and rising growth concerns in the economy. The rate cut coupled with the budget stimulus for the economy, and the real estate sector in particular, will impact consumer sentiments positively.”
-Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE

“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.”
-Zarin Daruwala, CEO, India, Standard Chartered Bank

"The RBI MPC cut policy rates by 25 bps--along expected lines. And on a positive note, the RBI MPC unanimously voted for a change in policy stance from ‘neutral’ to ‘accommodative’. This dovish undertone is also being reflected in bond yields further softening post the policy announcement. The RBI also said that it has set up a committee to comprehensively review the liquidity management framework by mid-July, and this will be important for transmission of the rate cuts in the system. The RBI governor commented that partial transmission of the earlier cumulative 50 bps rate cut has happened at a slightly faster rate than previously. However, the pace of transmission will be dependent on the liquidity environment, credit conditions, and also considering the relatively elevated credit to deposit ratio (with deposit growth lagging credit growth).
On the economic front the RBI acknowledged the global and domestic growth slowdown and cut the GDP growth forecast for FY20 to 7.0% from 7.2% earlier. However, on a positive note the governor added that the central bank is ready to support growth concerns to aid aggregate demand and private investment. We had earlier also commented that with inflation well below its target, the central bank’s focus will shift more from inflation to supporting domestic economic growth—and this statement by the governor seems along expected lines.
The governor indicated that the central bank is closely monitoring the stress in the NBFC/HFC sector, and will not hesitate to act in case of any financial instability.
From an investment perspective the sharp fall in bond yields over the past month has benefited duration and bond funds. Presently, we prefer the short to medium term end of the yield curve."
-Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life Insurance Company

“25 bps cut by the RBI is the third consecutive cut in 2019. The transmission of the previous rate cuts had been very discouraging at only 5-10 bps. As the monsoon predication is very positive, we expected RBI to take a bolder step and do 50 bps rates cut, that would have given clear signal to India Inc to push for growth and take investment decisions thereby maintaining the capex cycle.
Because of higher interest rates the consumer spending like auto sales, real estate etc. has been very weak. We urge RBI to open up funding to retail NBFCs through banks that will stimulate the consumer spending.”
-Umesh Revankar, MD and CEO - Shriram Transport Finance Ltd

"Revision of repo rate by 25bps for the third time in the consecutive year is an encouraging move for the real estate sector and shows a softer stand towards lending. The rate cut and moderation in the coverage ratio with recent instances of liquidity injections indicate that the RBI is ready to take more risks. The revision in the key policy rate would not only benefit the developers, but will also be in favor of homebuyers as it will lead to lowering the EMI burden, this will in turn lead to boosting affordable and mid segment housing sales. All in all we believe that the rate cut will provide a boost to the real buyer and will lead to much needed investment in the sector. This change is very positive and will be a boost to the languishing real estate market."
-Saurabh Vohara, Business Head - NoBroker

"The Reserve Bank of India (RBI) announcing another repo rate cut by 25 basis points (bps) is good news for borrowers. This is the third time in a row that the central bank has cut key rates this calendar year. After a huge public mandate for the current government, the much needed push to the economy was eagerly awaited. After the expected tax reduction in GST, the cut in the repo rate is yet another positive step for the real estate sector. Overall, this is going to have a positive impact on the housing market and we expect sales and launches to gain further momentum in the current financial year. Borrowers can hope for more rate cuts in the future as monetary policy stance has been changed from neutral to accommodative."
-Mayur Shah, MD of Marathon Group

“This move to reduce the repo rate will be great from a sentiment point of view, and will add to the current wave of optimism that has been infused into the market, with the re-election of the NDA government. Whether home buyers benefit from this directly or not, will depend largely on whether the banks pass on the rate cut benefits to them. In the past, that has not happened. However, this fact is also to be evaluated in light of another fact - with the ongoing NBFC crisis and increasing NPAs, reducing interest rates for borrowers, is not very easy for banks. We are however hopeful that with the increasing sales momentum in the last quarter and the improved market sentiments post the election results, this move will add a much-needed boost to the current market sentiments.”
-Mani Rangarajan, Group Chief Operating Officer- Housing.com- Proptiger.com- Makaan.com- Fastfox

“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.”
-B Prasanna, Group Head – Global Markets – Sales, Trading and Research, ICICI Bank

Date: 
Thursday, June 6, 2019