Industry Perspective: Is RBI rate cut a ray of hope?

RBI

The Reserve Bank of India (RBI) recently reduced its Repo Rate by 25 bps to 5.15 per cent from 5.40 percent for the fifth consecutive time in the financial year, citing the slowdown in the global and domestic economy. While Shaktikanta Das, Governor, RBI believes it to be a necessary step for reviving growth, experts from across the Banking, Financial Services and Insurance (BFSI) sector see hope in the recent cut and are naming it as a piece of good news for borrowers in the long run.

RBI

Thomas John Muthoot, CMD, Muthoot Pappachan Group

“In the backdrop of the measures taken by the government and central bank to drive structural changes in the economy and increase cash inflow, another repo rate cut of 25 bps adds to the much-needed respite. These collective measures can be seen as a build-up to complement the government’s fiscal stimulus. However, for the common man to get the benefits of these cuts, it is highly important that banks ease the challenges for NBFCs to get funding from them, eventually pushing consumer sentiments. Also, with the festive season approaching, it becomes imperative for the banks to show a willingness to remain flexible until economic conditions improve and customer spending intensifies.”

 Abheek Barua, Chief Economist & Executive Vice President, HDFC Bank

The monetary policy speech clearly focused on growth and has done so by reducing the repo rate by 25 bps. This indicates an immediate reduction in borrowing cost for some segments of the borrowers. While for the others it will come down over the course of time. RBI has also recognized that inflation is no longer that much of a worry and despite some pressures building up in the system, it will be well under control. We expect more rate cuts in the forthcoming policy considering growth is somewhat tepid and the RBIs mission as it has made it clear today is to get growth up through a combination of rate cuts and keeping money moving in the system. Overall in our perspective monetary policy indicates good news for borrowers.

 Rajiv Sabharwal MD & CEO, Tata Capital

 “The 5th consecutive policy rate cut will give a boost to the economy. This 25 bps rate cut complements the recent measures are taken by the government to ease supply-side pressures. Inflation continues to be within the comfort corridor. Agricultural output is expected to grow at a healthy pace which will further mitigate inflationary pressures. RBI’s rate cut has been measured, in spite of the recent drop in crude prices, however, volatility cannot be discounted. Concerns remain around global growth amidst escalating trade tensions. The regulator may want to create a cushion against any concomitant uncertainties. Any further policy intervention would depend on emerging data points.”

Amit Tewary, Chief Operating Officer, LoanTap

“In RBI’s fourth policy review of the current fiscal announcement, the repo rate is cut by another 25 basis points. This comes in lieu of RBI attempts to increase demand in the economy. This was expected to move as GDP growth is pegged at 6.1 percent which is lower than before and it is important to increase demand in the economy.

RBI has taken consistent steps to increase demand that includes linking of consumer loans to external benchmark (i.e. repo rate), corporate tax reduction to encourage growth among industries and corporates and for micro-finance lenders, with the loan limit increased to Rs 1.25 Lakh, that will accelerate loan demand in smaller cities. Cumulative repo rate cuts this year have been, 1.35 percent and the current repo rate stand at 5.15 percent. ”

Harsh Jain, Co-founder, and COO, Groww

Government has reduced repo rate further by 25 bps which now stands at 5.15 percent, this is a 5th straight cut in the repo rate by RBI and is a strong positive sign of the commitment of our government to boost economic growth, this move is a welcome opportunity for long term investors.

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