By Accommodation Times News Service
The RBI (Reserve Bank of India) in its Second-Quarter Review of Monetary Policy 2013-14 hiked the repo rate by 25 bps (basis points) to 7.75%.
Chanda Kochhar, MD & CEO, ICICI Bank
RBI’s continued move towards normalizing monetary policy operations, through reduction in the MSF rate and increase in the liquidity available through LAF, are welcome measures. The increase in the repo rate was along expected lines, given recent trends in inflation. As a country, we now need to focus on ways to revive growth and address supply-side causes of inflation.
Shailendra Bhandari, MD & CEO, ING Vysya Bank
The policy is fairly balanced, keeping in mind growth imperatives and inflation dynamics. The changes in the MSF and Repo rates were along expected lines, but what was reassuring was the neutral tone of the Policy, and the clear message that while Inflation is a concern, this will not be completely at the cost of Growth.
Sachin Sandhir, MD, RICS South Asia
For the real estate, the upward revision in repo rate by the RBI is likely to increase pressure on real estate developers, who are already struggling to raise funds for construction amidst reduced lending from banks, From the consumers’ perspective, this revision will also affect the sentiments, as retail loans may become costlier. Because of subdued sentiments, sales have already dropped across regions. This will impact the new prospective buyers too, as uncertain economic conditions have made them cautious. As a result, these buyers are already taking longer time to decide on a particular investment.
Lakshmi Iyer, Sr. Vice President and Head, Fixed Income, Kotak Mutual Fund,
Despite a good kharif season, the money velocity in the agri-sector may be imposing a high price floor for the agri commodities. As a result, the inflation may not moderate in a hurry and may require further policy measures going ahead
Ajay Srinivasan, Chief Executive, Financial Services – Aditya Birla Group
According to the revised RBI policy, government borrowing costs of 1-3 year tenure should decline. The short term impact on the banking system’s overnight borrowing costs is probably neutral, though costs should come down as liquidity conditions are further normalized.
C. Shekar Reddy, President, CREDAI-National
Considering the overall economic situation and challenges being faced by the industry, we were looking forward to the reduction in repo rates, to ease the burden on the buyers and developers. The continuation of the policy to increase repo rates in the monetary policy, to control inflation, will further increase the problems of the developers who are grappling with high interest rates. Keeping in view the demand-supply gap in the affordable housing segment, the government needs to support the sector by focusing on development initiatives such as recognizing affordable housing as a priority sector for funding and providing added incentives to the lenders and developers.
Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield
The real estate sector, which is already facing funding issues, will not view the hike in repo rate positively. Any such hike affects buyer sentiments, thereby having a negative impact on sales. Developers, who were hoping for an improvement in the purchase scenario during the festive season, may not see the same kind of response as expected, leaving them with little choice but to either look at revising rates (which may not be an immediate measure for any developer) or come up with innovative marketing schemes and provide greater value-adds to their current offerings.
Manju Yagnik, vice chairperson, Nahar Group
We understand RBI’s concern on the rising inflation, but it is a fact that the rise in the key policy rate would lead to increase in finance cost and also affect housing demand during this festive season which is just about to begin. Like most sectors, real estate sector is also currently passing through a challenging phase, and therefore we are expecting the RBI Governor to announce measures aimed at strengthening confidence of the real estate industry in the days ahead.
Samantak Das, chief economist & director research, Knight Frank India
RBI has once again shown its stance towards curbing inflationary pressures. By doing so, there is a substantial compromise being made towards the country’s GDP growth. Since the mid-quarter review in September, global economies have shown firming up of activities and as a result, Indian exports have shown an upward trend. Additionally, the exchange rate has shown stability and agricultural output is expected to improve even further, in the coming months. Keeping this in view, the Central Bank could have adopted a wait and watch approach by deferring the repo rate hike. This could have helped various sectors including real estate to capitalize on the positive consumer sentiment ahead of the festive season to propel growth.
Naresh Takkar, managing director & CEO, ICRA
The RBI as expected hiked the Repo rate by 25 bps to respond to the uptick in inflationary expectations and guard against a generalization of inflationary pressures, since factors other than high interest rates, such as structural constraints have also contributed to anemic growth. In order to assuage liquidity concerns at affordable rates to productive sectors, the RBI cut the marginal standing facility (MSF) rate by 25 bps, compressing the Repo-MSF corridor back to 100 bps, and also increased the magnitude eligible under term-repo by 0.25% of NDTL. Given the inflationary expectations for the rest of the year, we believe that the RBI could increase the Repo rate again by 25 bps during the second half but provide liquidity using other monetary tools at its disposal.