 "Keki Mistry")
Arundhati Bhattacharya
Chairman, State Bank of India
Easing inflation scenario at home and global developments have prompted the Reserve Bank to cut the key policy rate by 50 basis points, which is a pleasant surprise. The US Federal Reserve, concerned over weak global growth, has left interest rates on hold. The rate cut has been based on the need to look inwards for complementing external demand with domestic demand and support investment activity. The experience on inflation has been according to RBI's expectations and the official first lap of six per cent CPI inflation by January 2016 is more or less achieved. Headline CPI-based inflation reached its lowest level in August since November 2014. The projection of benign inflation throughout FY17 and reaffirmation of a continued accommodative policy shows inflation is perhaps less of a concern now and growth is taking centrestage. We expect RBI revised projection of 5.8 per cent in January 2016 to have an upward bias.
MD & CEO, ICICI Bank
The reduction in the policy rate by the Reserve Bank of India (RBI) is a precursor to reduction in interest rates in the economy, which will boost growth. The monetary policy statement reflects a strong commitment to the RBI's stated objectives and policy framework, and recognises the government's efforts in addressing supply-side constraints and its commitment to fiscal targets. The policy has provided a strong push to reforms in the financial sector and markets. Liberalisation of foreign portfolio investment limits and issue of rupee-denominated bonds will help create a deeper and stronger market to support future growth. Steps to promote affordable housing will help in promoting the government's development agenda. Overall, the joint efforts of the government and RBI, to put in place enablers that can propel the economy to a sustained higher growth trajectory, are laudable.
Vice-chairman & CEO, HDFC Ltd
The front-loading of monetary policy action by reducing the repo rate by 50 basis points beat expectations and is a welcome measure. By increasing the investment limits for foreign portfolio investors in G-Sec, the RBI has taken into account the possibility of an interest rate increase by the Federal Reserve. This move will ensure foreign inflows and prevent currency volatility. Rajan has remained firm on his objective of pursuing an accommodative monetary policy. Despite below par monsoons, the government's food management and the minimal rise in support prices have ensured that RBI has had the bandwidth to cut rates. Inflation has structurally come down and the rate cut will aid in spurring growth and improve investment sentiments. From a housing finance perspective, the proposal to reduce risk weights is a positive. However, there is a need to define 'affordable housing' as there are huge variations in prices between metros and outskirts.
Chairman, Marico
While there was some expectation of a rate cut, no one was aware of the magnitude. A 50-basis point cut is a good sign and was long overdue. While inflation targeting was something the governor spoke of only a fortnight ago, the fact that retail inflation was under control could have changed his mind. During August, retail inflation, which RBI tracks to set rates, eased to 3.66 per cent from a revised 3.69 per cent a month ago. The pressure to cut rates was only growing as a result. The governor has responded to this need. While this will help spur growth, it is one part of the exercise to get the economy on track. The reforms process will have to move in tandem. The central and state governments must come on the same page on goods and services tax (GST). The proposed deadline of April 1, 2016 for GST rollout should be implemented. Such measures will stimulate long-term growth.
CEO, DLF Ltd
The Reserve Bank of India (RBI) was widely expected to cut the repo rate by 25 basis points (bps), but has positively surprised industry and markets with a 50-bp cut. This sizeable reduction was necessary to bring down loan rates and rekindle demand in the economy. RBI now needs to ensure seamless transmission, so that banks follow suit and bring down their lending rates for the housing sector. Moreover, this will also encourage people to buy homes ahead of the festive season. In another welcome move, the RBI has also decided to cut the minimum risk weight applicable to individual housing loans that are well collateralised, from the current 50 per cent. While details of the new risk weight are awaited, this will further reduce borrowing costs for genuine home buyers and bring down commensurate risks for banks. It is time to implement the suggestions of State Bank of India chairperson on re-introducing teaser home loan rates.
Chairman & CEO, Edelweiss Group
Indeed a welcome surprise by the Reserve Bank of India. Clearly, policy-makers are now much more comfortable with inflation dynamics. As monetary transmission takes place over the coming months, it will support the real economy. The governor has categorically stated that focus will be on improving transmission of the easier monetary policy to the real economy. Anchored inflation expectation, slower global growth, expansionary monetary policy globally and a more dovish-than-expected US Federal Reserve seems to have triggered a 50-basis point reduction in the repo rate. This is a significant departure from market expectations and should support broad-based reduction in borrowing cost. Although credit growth pick up will continue to depend on business sentiment, renewed focus on growth is a major positive, especially in face of slow global growth. The policy statement indicates renewed commitment towards growth.
