Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) in its resolution of April 6, 2023, decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent. Along with this, according to MPC real GDP growth for 2023-24 is projected at 6.5 per cent with Q1:2023-24 at 7.8 per cent; Q2 at 6.2 per cent; Q3 at 6.1 per cent; and Q4 at 5.9 per cent, with risks evenly balanced. The entire MPC resolution can be seen here. Following are the India Inc. reactions to this announcement as they spoke to Team Estrade. These are from the Finance, General Business and Real Estate industry spaces.
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Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank
“The RBI’s “surprise” pause on the repo rate in April is completely in line with our expectation. In fact, the 6-0 voting in favour of a pause is stronger than our expectation. With the likely softening of CPI to low- to mid-5% levels in the coming month, the current repo rate of 6.5% implies that India’s real policy rate will hover around 1% during 2023-24, while maintaining a policy rate differential of about 1.5% with the US. This clearly helped the decision of a pause on the repo rate.
In the current EBLR regime of immediate and fuller pass through of repo rate hikes to lending rates, it is heartening to see a more balanced and nuanced approach from the MPC. The material narrowing of trade and current account deficits and range-bound INR must have offered the MPC better comfort for pursuing a more “Fed-independent” monetary policy.
It was important for the RBI to leave the policy rate at a level, which can be kept unchanged for a long time, as against hiking rates very aggressively now and building up pressure for cutting the same only in few months. ”
Madan Sabnavis, – Chief Economist, Bank of Baroda
The policy has its share of surprise with a unanimous decision to keep repo rate unchanged. This goes along with a tint of optimism compared with its outlook in the February policy. The GDP forecast is up marginally to 6.5% and inflation down to 5.2%. Though the difference is just 0.1% for both variables the sentiment has been boosted as reflected in the market with 10 year yields moving down. This will ensure that yields remain stable.
The MPC is working on a premise that base effect will lower inflation in coming months but has ringfenced view that the no rate change policy holds only for this policy. Hence, further rate hikes have not been ruled out if inflation path changes.
On the whole a very balanced and nuanced view has been taken which ensures stability in this status quo situation while not committing to the future path that will be data driven.
Achala Jethmalani Economist at RBL Bank
“The policy appears to be a hawkish pause as the MPC turns data dependent whilst it awaits the monetary efficacy from prior rate hikes to play out into the deposit and lending rates. With the Governor stating that today’s pause on policy rates is for this policy only, it has the elbow room to act on rates if inflation readings surprise on the upside. Basis the current growth-inflation dynamics and the global backdrop, the Repo Rate is likely to peak out at 6.50-6.75% with a possibility of a final 25bps to be delivered in 1H FY24.”
Manoj Patwal, Founder & MD, BetterServ Ventures Pvt. Ltd.
“The decision by the RBI leaving repo rates unchanged at 6.50 per cent is a good move which will halt inflationary trends and increase housing demand. We can expect market sentiments to improve as more liquidity comes into the sector. Further, we look forward to the government lowering stamp duty rates, which will bring cheer to homebuyers, driving housing demand.”
Satish Nair, Head – Treasury and Corporate Affairs, Vastu Housing Finance.
“After February’s hike of 25 basis points to 6.5 percent, we expected a pause in the hikes as inflation was expected to be range bound and to support economic growth. The housing sector is set on an upward growth trajectory; however, inflation needs to be watched. RBI’s continued commitment to price, financial stability, and sustained growth will result in robust macro-economic growth”.
Prabhat Chaturvedi, CEO, Netafim Agricultural Financing Agency
“The central bank is focusing to give impetus to fiscal growth while ensuring that India’s financial system is not exposed to extraordinary shocks. The unchanged repo rate will provide more elbow room to the lenders to increase the credit flow. Today’s announcement by the central bank with an indication towards an accommodative stance has laid out the path to policy unwinding. The pausing of the repo rate is a welcoming step. The policymaker should evaluate the impact of cumulative 250 bps rate hikes in the last financial year, especially MSMEs with retail borrowers before revisiting its aggressive stance on inflation. We hope that the conscious efforts by the policymakers stimulate the growth outlook of all the key sectors.”
Pranay Jhaveri, MD – India and South Asia, Euronet
“RBI’s pause in the repo rate is a prudent move that will help stimulate the credit flow and make lenders resilient from experiencing anticipated demand shocks. At the same time, the indication towards an accommodative stance shows the central bank is committed to taming inflation and ensuring India’s financial system is not exposed to extraordinary factors.
The announcement made by RBI on permitting the operations of pre-sanctioned credit lines by banks through UPI is a transformative step towards a comprehensive digital economy. It would provide greater financial flexibility and convenience to borrowers. Overall, the expansion of UPI’s potential is a major milestone that is set to unleash a plethora of benefits. This progressive step will not only enhance the convenience and flexibility of financial transactions but also pave the way for the further growth of the UPI platform. With the added feature of pre-sanctioned credit lines, we can expect a surge in transaction volumes and a more seamless user experience, increasing the adoption of digital payments across the country.”
Kaushal Agarwal – Chairman, The Guardians Real Estate Advisory
“The recent decision by the Reserve Bank of India (RBI) to stand pat on repo rates is good news for the real estate sector. This pause in rate hikes will encourage homebuyers to take advantage of lower home loan rates and invest in property, driving growth in the sector. Stable interest rates provide attractive financing options, making it easier for potential buyers to purchase homes and stimulating the market. This move will also provide a breather to existing homeowners who were burdened with rising EMIs due to the rate hikes witnessed in the past six policies. All in all, the RBI’s decision is positive for keeping the real estate market vibrant and prosperous.”
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RBI MPC: India Inc. Reacts
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