 "Here's how industry leaders reacted to the RBI's June MPC decisions")
In its second meeting for FY25 and the first after the general elections, the Reserve Bank of India (RBI) announced on Friday that the benchmark repo rate will remain unchanged at 6.5 per cent for the eighth consecutive time. The decision was taken by the Reserve Bank of India’s (RBI) six-member Monetary Policy Committee (MPC) by a 4:2 majority.
The MPC, headed by RBI governor Shaktikanta Das, also decided to continue its stance of ‘withdrawal of accommodation’.
While it raised the forecast for India’s GDP growth from 7 per cent to 7.2 per cent, the RBI remains worried about the sticky inflation that is mitigating the core CPI’s disinflationary trend.
The RBI’s latest monetary policy decision on Friday has garnered reactions from various industry leaders.
Finance sector
George Alexander Muthoot, MD of Muthoot Finance praised the RBI’s cautious approach amid global economic challenges. “We welcome the RBI’s prudent decision to maintain the status quo on the repo rate and its stance on ‘withdrawal of accommodation’. We are encouraged by the resilience of the Indian economy,” he said.
Highlighting the GDP growth projection increase to 7.2 per cent from the previous 7 per cent, Muthoot expressed optimism about the demand for various loan segments, including gold loans and housing loans.
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“We were also glad to witness the resilient performance showcased by the Indian financial ecosystem backed by improvement in asset quality, enhanced provisioning for bad loans, sustained capital adequacy and rise in profitability. Such recognitions encourage NBFCs like us to boost our growth multi-fold,” he said.
Meanwhile, Puneet Pal, head of fixed income, PGIM India Mutual Fund noted that the RBI’s decision was expected, with no changes to policy rates or the monetary stance. He pointed out that two members of the Monetary Policy Committee (MPC) voted for a rate cut, indicating a potential move towards monetary easing.
“RBI maintained its inflation projection for FY25 at 4.50 per cent but increased its GDP growth projection for FY25 to 7.20 per cent from 7 per cent earlier,” Pal said.
Real estate sector
Sterling Developers’ chairman and MD Ramani Sastri welcomed the RBI’s decision to maintain status quo, stating it bolstered market confidence. “With the economy looking up and all signs being positive, there is no hesitation among homebuyers to invest in residential real estate for long-term returns,” he commented. Sastri emphasised the importance of stable home loan rates for consumer confidence and suggested that a future repo rate cut would further enhance homebuyer sentiment and affordability.
Meanwhile, Shishir Baijal, chairman and MD, Knight Frank India aligned his expectations with the RBI’s announcement, emphasising the upward revision of the economic outlook. “With the economic outlook revised upwards, we anticipate the RBI will focus on controlling inflation, aiming to bring it under the 4 per cent target,” he said.
Baijal noted that a good monsoon could help control food prices, potentially leading to a reduction in interest rates by the end of 2024, benefiting the real estate sector, particularly affordable housing.
Insurance sector
Kotak Mahindra Life Insurance’s Executive Vice-President of Investment, Churchil Bhatt described the MPC’s outcome as expected and ‘unexciting’, particularly for bond markets. “Today’s unexciting Monetary Policy Committee (MPC) outcome is an expected development for bond markets, especially after the post-election volatility,” he stated.
Bhatt highlighted the RBI’s commitment to achieving a durable 4 per cent headline CPI and noted the unchanged policy stance, reflecting a prolonged pause in policy rates.
Ratings and economic analysis
Meanwhile, Manoranjan Sharma, chief economist at credit ratings agency Infomerics Ratings emphasised the Indian economy’s resilience, citing a GDP growth of 8.2 per cent for FY24.
“The economy revealed remarkable resilience despite higher-rates-for-longer, geopolitical uncertainties, and lingering Covid concerns,” Sharma observed.
Ankit Ratan, co-founder and CEO of fintech firm Signzy, lauded the RBI’s focus on building a secure financial system, especially in light of rising digital payment frauds. “The RBI’s establishment of a Digital Payments Intelligence Platform during today’s MPC meeting is a significant step towards mitigating fraud risks,” Ratan said.
He highlighted the RBI’s commitment to customer protection through initiatives surrounding data protection, cybersecurity, and KYC procedures.
Overall, the RBI’s decision to maintain the repo rate and its careful monitoring of inflation and growth dynamics have been well-received across various sectors, indicating a cautious yet optimistic outlook for India’s economic future.