RBI holds fire on rates, can be good news for investors
dubai — The Reserve Bank of India (RBI) on Thursday decided to keep its repo rate untouched at four per cent and the reverse repo rate at 3.35 per cent, while maintaining its accommodative stance.
Analysts said the pause has come after two consecutive rate cuts in March and May 2020.
A status quo on rates could be good news for fixed-deposit investors as banks have been continuously cutting rates on deposits for more than a year now. Some fixed-deposit tenures now fetch lower interest rates than savings accounts.
Analysts said the RBI’s move has ensured that the transmission of liquidity in system is further supported and at same time keep tight leash on headline inflation. In its August policy review meeting, the RBI’s six-member monetary policy committee (MPC), headed by governor Shaktikanta Das, observed that real GDP growth will remain negative in the current financial year amid rising inflationary pressure and a grim economic outlook.
Das said that headline inflation may remain elevated in the second quarter of fiscal year 2021, but may moderate in the second half, aided by large favourable base effects.
The RBI’s measures will go on to accelerate the economy, enhance liquidity, improve flow of credit and deepen digital payment facilities Anuj Puri, chairman of Anarock Property Consultants
This balancing act, coupled with the infusion of funds to NHB, will benefit real estate, where emphasis on project completion and value creation is paramount Ajay Sharma, managing director at Colliers International India
He said amid cash flow disruption due to Covid-19, the RBI will allow stressed MSME borrowers to restructure their debt under the existing framework, provided their accounts with the concerned lender were classified as standard as on March 1, 2020. But this restructuring will have to be implemented by March 31, 2021.
“With Covid-19 continuing to disrupt normal functioning and cash flows, the stress in the MSME sector has got accentuated, warranting further support,” Das said.
Das said that an additional special liquidity facility of ₹100 billion will be provided at the policy repo rate to National Housing Bank and National Bank for Agriculture and Rural Development (Nabard).
Anuj Puri, chairman of Anarock Property Consultants, said the RBI kept the repo rate untouched much along expected lines, amid a recent rise in retail consumer prices. The RBI was expected to do all it can to keep inflation rates reined in for the duration.
“However, the RBI announced several additional measures that will go on to accelerate the economy, enhance liquidity, improve flow of credit and deepen digital payment facilities, among others. Commendably, its allotment of ₹50 billion each to NHB and Nabard is a much-needed step for sectors including real estate reeling under the liquidity crisis. It will help infuse capital into HFCs and eventually provide relief to developers battling liquidity issues.”
Ajay Sharma, managing director for valuation and advisory services at Colliers International India, said with the repo rate and CRR rate unchanged, the RBI has ensured the transmission of liquidity in system is further supported and at same time keep tight leash on headline inflation.
“This balancing act, coupled with the infusion of funds to NHB, will benefit real estate, where emphasis on project completion and value creation is paramount. The unchanged parameter will ensure the continued availability of housing loans at rates that are at historic lows in 15 years which will go further in boosting residential demand,” he added.