Mumbai: The Reserve Bank of India on Thursday cut benchmark interest rate by 0.25 per cent to 6.25 per cent on expectation of inflation staying within its target range, a move that may translate into lower monthly installments for home and other loans.
The central bank also changed its monetary policy stance to 'neutral' from the earlier 'calibrated tightening', signalling further softening on its approach towards interest rates.
In the first policy review under Governor Shaktikanta Das, the six-member Monetary Policy Committee voted 4:2 in favour of the rate cut, while the decision to change policy stance was unanimous.
The RBI cut its estimates on headline inflation – which cooled off to a 18-month low of 2.2 per cent in December – for the next year, and expects the number to come at 2.8 per cent in March quarter, 3.2-3.4 per cent in first half of next fiscal and 3.9 per cent in third quarter of FY20.
Industry leaders including Vijay Mansukani, MD, Mirc Electronics Ltd (Onida), Sanjay D Palve, CEO, Religare Finvest Ltd and many other industrialist believe that reduction in repo rate and CRR would help in reviving the investment cycle in the country and will also boost consumption and support growthand this will surely improve the liquidity conditions facing by the economy.
Mr Vijay Mansukani, MD, Mirc Electronics Ltd. (Onida) said, “Repo Rate cut of 25 bps is quite an encouraging move by RBI though it was mostly on expected lines. This should increase the consumption positively and also overall sentiments of the people. Positive sentiment on the economy generally encourage people to spend on necessities like televisions, air conditioners and washing machines etc.”
“This will surely improve the liquidity conditions facing by the economy. Moreover, downward revision in inflation targets for Q4 and next year suggest recovery in overall economic growth. We believe that these steps will certainly help in picking-up overall consumer durables demand. This also an indication that FY20 would be low interest rate regime, if inflation continues to be well within 4 per cent”.
“The repo rate cut of 25 bps basis downword trend in inflation targets for this quarter and next few quarters are certainly the much needed moves by RBI. These steps will improve liquidity in the economy and thus help in improving consumption by making cheap finance available to end consumer. This will also boost imvemts in serivice as well as core sectors in economy”.
“Regarding the ease in norms for maintaining risk weights on bank lending to NBFCs, this is again a welcome move by RBI. The reduction in risk weight will free up the equity capital that allow banks to lend more to stronger NBFCs. Thus, this will help banks to improve their balance sheet and capital ratios as well as NBFC which are better managed can have access to liquidity now”, says Mr Sanjay D Palve, CEO, Religare Finvest Ltd and MD, Religare Housing Development Finance Corporation Ltd.
Mr Tushar Jain, MD & Founder, High Spirit Commercial Ventures Pvt Ltd, says “RBI’s decision of 25 bps cut in benchmark repo rate and lowering target of Inflation for this quarter and next year is a great call, we are very happy with the decision since both FMCG & FMCD sectors will have a direct impact of it. It will certainly improve the currently prevailing tight liquidity conditions and will help in overall improvement in the economic growth.
Since the disposable income of individuals will increase, it will surely boost the sentiments amongst people and thus improve overall consumer demand of goods and durable products like luggage bags, backpacks and activity bags.”
JHS Svendgaard Laboratories Ltd- Mr Nikhil Nanda – MD said. “We are quite happy with the RBI’s decision of 25 bps cut in benchmark repo rate and lowering target of Inflation for this quarter and next year. These will certainly improve the tight liquidity conditions facing by the economy. Moreover, overall improvement in economic growth will further lower interest rates leading to more savings and eventually rise in disposable incomes. We believe that this will surely boost the sentiments amongst people and thus improve overall consumer demand of goods like toothbrushes, toothpastes and other oral hygiene products”.