'Turning the policy corner': What experts have to say about RBI decisions

RBI monetary Policy: As the central bank keeps the repo rate unchanged at 4 per cent, here is what the industry experts has to say

The Reserve Bank of India kept borrowing costs at a record-low for an eleventh straight meeting, with the Monetary Policy Committee intent on insulating the economy from the risks of Russia’s war in Ukraine.
 
The monetary policy committee held the lending rate, or the repo rate, at 4 per cent. The reverse repo rate , or the key borrowing rate, was also kept unchanged at 3.35 per cent.
 
"The conflict in Europe has the potential to derail the global economy caught in the crosscurrent of multiple headwinds. Our approach needs to be cautious, but proactive in mitigating the adverse impact on India's growth and inflation," RBI Governor Shaktikanta Das said.

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Here is what experts have to say after the central bank's policy meeting:

Madan Sabnavis, Chief Economist, Bank of Baroda

"There is definitely a sign that interest rates will be raised and two repo rate hikes look very likely in the next two policies unless inflation comes down sharply, which looks unlikely. Banks have been given a cushion on the HTM front, which will help in this rising interest rate environment. This also means that both deposit and lending rates will move up, which is good news for savers, but not so much for borrowers. In short, the days of easy money are over."

Sakshi Gupta, Senior Economist, HDFC Bank

"The RBI turned the policy corner, turning more hawkish in today's policy. While the repo rate and stance were unchanged, the central bank normalised the policy corridor (with the introduction of SDF at 3.75 per cent) and said it will focus on withdrawal of accomodation. Recognising inflationary risks, the RBI raised its inflation to 5.7 per cent (up by 120 bps) and lowered its growth forecast to 7.2 per cent. The hawkish turn was warranted and it is likely that the central bank will change its stance to neutral in the coming policy, followed by a repo rate hike sooner than earlier expected. The 10-year bond yield is likely to move towards 7 per cent-7.25 per cent over the coming weeks."

Garima Kapoor, Economist-Institutional Equities, Elara Capital

"With recovery in Indian economy still at a nascent stage and risks to growth enhanced despite elevated inflation, we expect the MPC to move to a neutral stance in August policy and anticipate a repo rate hike in H2FY23. Amid inability to explicitly support the government borrowing program, the RBI enhanced HTM limit by 100 bps, which could calm the bond markets despite a sharp increase in inflation forecast."

Sujan Hajra, Chief Economist and Executive Director, Anand Rathi

“The 40 bps hike in reverse repo rate was ahead of consensus expectations. The downward revision of GDP growth rate and upward revision of retail inflation were expected. The RBI is now anticipating much faster rise in inflation than earlier. The monetary policy stance, however, remains accommodative by normal standard. The RBI is also trying to flatten the yield curve by pushing the short-term rates higher and taking measures to ensure that the yield on long dated securities do not rise much. With today's measures RBI has moved to the path of gradual increase of policy interest rate and phased withdrawal of liquidity. From a medium term perspective, the measures are supportive of growth, price stability and orderly development in the financial markets.”

Ramani Sastri, Chairman & MD, Sterling Developers

"RBI's decision to keep policy rates unchanged will continue to improve sentiments in the real estate sector and signals the government’s focus on driving consumption. This will also provide the required fuel for the growth of the economy along with the real estate sector, which is allied with several other industries. For home buyers, this decision will help reinstate confidence and further access to affordable home loans and help foster housing demand."

AK Das, MD & CEO, Bank of India

"Policy continues to have 'feel good' stance from the point of view of durable recovery process.The projected numbers perhaps warrant more frequent revisits in the face of dynamically evolving operative environment, within and outside India."

Kamal Khetan, Chairman, Sunteck Realty

“Today's announcement by the Reserve Bank of India to rationalize the risk weightage on housing loans and link them to loan-to-value (LTV) ratios till March 2023, will boost the nation’s real estate sector. This announcement will encourage banks to continue lending more to individual homebuyers without feeling the stress on their balance sheets. It will effectively result in higher credit flow to the housing sector and eventually make the residential segment a lucrative investment for aspirational homebuyers.”

Soumitra Majumda, Partner, J Sagar Associates

“The RBI statement reflects cautious optimism – focus on ensuring robust recovery before accelerating growth levers. The accommodative policy stance should nurture the credit markets – though the hint of a calibrated withdrawal may add a dash of uncertainty. Continued government borrowings should be directed towards delivering the infrastructure development promises of the government – this will certainly bolster the investment sentiment for India. Policy thrust on climate change risks and its criticality on sustainable financing – important development to be closely watched. The policy also provides adequate push for fintechs – both in terms of deepening the market and for enhancing security.”

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory

“The RBI played the role of the Good Samaritan by maintaining the status quo on rates despite inflationary pressure. There may be criticism from a macro-economic perspective, but we need to understand the fact that the RBI is playing a complex game of balancing growth with inflationary pressure. This could be elucidated from the fact that despite geopolitical pressure, the RBI had decided to hold its key lending rates steady at record low levels for the 11th straight meeting to support a durable recovery of the economy from the Covid-19 pandemic."

Anuj Puri, Chairman, ANAROCK Group

"The real estate industry had been gearing up for an increase in the repo rates, and the fact that this has not happened is obviously positive for home loan borrowers. Developers' input costs have been inflating steeply and a hike in property prices is not more or less inevitable. Moreover, the acquisition cost in Maharashtra has gone up by 1% on account of the metro cess applicable from this month. To this sombre backdrop, increased home loan lending rates would have been a considerable setback.