RBI KEEP RATES UNCHANGED, SECTOR NOT SATISFIED.
In its fifth monetary policy of the calendar year and third of this fiscal year, the RBI announced that there will be no change in the rates in this policy review. With this decision, the repo rate stands unchanged at 7.25 percent, reverse repo rate at 6.25 percent, Statutory liquidity ratio (SLR) at 21.5 percent and Cash reserve ratio (CRR) at 4 percent respectively. The apex body had already made three deductions in the key rate during this calendar year by 25 basis points each time, giving a total deduction of 75 basis points to the repo rate and bringing it down to 7.25 percent from 8 percent in 2015 itself.
“A no rate change this time was pretty much on the cards owing to retail inflation that stood at an eight month high of 5.4 percent in June, CPI going up a bit due to food prices and irregular monsoon season affecting the country. This is rather a careful decision by the RBI which has already done a triple rate cut this year. Thus, taking the current economic situation into consideration the decision looks just and in the final quarter of this calendar year, RBI might do another rate cut to better the sentiments”, asserts Mr. Deepak Kapoor, President CREDAI- Western U.P. & Director, GulshanHomz. Adding to the view, Mr. Rajesh Goyal, Vice President CREDAI- Western U.P. & MD, RG Group states, “Looking at the current sentiments of the market which have been keeping a bit low recently, we were pretty hopeful that RBI might keep the rate cut cycle moving. The tight macroeconomic situation of the country could be attributed as the reason for the apex body to maintain the repo rate. Also, with the onset of Navratri followed by Dussehra and Diwali, the festive season brings positive sentiments, so a rate cut is expected in the next sessionwhich is due on September 29th”.
The real estate sector was hopeful of a rate cut this time in order to boost the sentiments in the market. The prices all across the country have fallen drastically along with huge inventory getting piled up especially in tier 1 regions. The banks had reduced their lending rates as well after the last two RBI policy reviews. “The way this sector is behaving at present, we were expecting the RBI to give us a much needed relief in the form of another rate cut. If not the repo rate, then atleast a cut in CRR would have increased a bank’s lending capacity, the benefit of which would have ultimately passed onto the consumers and enhanced liquidity in the market. Now it’s quite likely that the rate cut is postponed till the next policy review which will actually help the market to bounce back”, says Mr. Ashok Gupta, CMD, Ajnara India Ltd.
The next and fourth review policy of this fiscal year is due on September 29th, 2015 and all the eyes and ears will be stuck on Mr. Rajan as how he takes the next policy review forward. The final festive season of the Hindu calendar year will be commencing on or around 29th September itself with Shradhs, followed by Navratris, Dussehra and twenty days later, Diwali. Thus, RBI might have to give a rate cut in its next policy review so that consumer sentiments are further boosted up. Mr. Praveen Tyagi, CMD, VVIP states that “Real estate sector in particular banks heavily on the final festive season of the calendar year, as most customers in India usually wait for this time of the year to come and invest in gold, automobile, shares and largely, property. The religious sentiments of people are deeply attached with the festivals of Navratris, Dussehra and Diwali and developers also offer best deals during this time. Therefore, if the RBI also does a rate cut in its next review then the demand for property market will see a steep rise as home loans will be already cheaper and better deals will be made available to the customers”. “The RBI has already started the rate cut cycle as it had promised in the beginning of the year. Although, we were anticipating a rate cut this time as well as sentiments were keeping a bit low and this would have helped the cause. The wholesale inflation is keeping low, WPI is negative and even the government was hopeful for a rate cut which would have pushed the industrial growth as well. The manufacturing sector, banking industry, real estate and retail sectors will perform well in the upcoming months as final festive season is soon approaching. Thus, a rate cut then will be a great news for the sector and the economy in general”, concludes Mr. Rajnikant Sharma, CMD, RJ Group.