Industry reaction over RBI decision to keep benchmark interest rate unchanged at 4 per cent

cityairnews Apr 7, 2021 12:29 0

The Reserve Bank of India (RBI) today (April 7, 2021) decided to keep benchmark interest rate unchanged at 4 per cent. However, it maintained an accommodative stance, implying rate cut in the future if the need arises to support the economy. This decision has been taken in view of fresh Covid wave and elevated food inflation. `City Air News’ has received many reactions over the same. Here are these reactions:

Bhushan Nemlekar, Director, Sumit Woods Limited
"The RBI's decision to maintain its accommodative stance was on the expected lines in light of the recent resurgence of Covid-19 infections and its potential to cause the on-going economic recovery to stumble. The prevailing low home loan rates are already enticing for homebuyers. It's a high time bank needs to pass on the benefits to the homebuyers. With auspicious occasions like Gudi Padwa and Akshaya Tritiya already round the corner, the real estate sales are expected to be further driven by developer discounts and flexible payment plans."

Abheek Barua, Chief Economist, HDFC Bank
“The RBI policy was more dovish than expected with the central bank recognising the risks associated with the rising infection cases in the county and continuing its support for growth through a number of measures including its commitment to keep liquidity in surplus and an extension of measures like the on-tap TLTRO. Fears of any pre-mature tightening either through rates or liquidity management by some sections of the market have been put to rest by RBI’s dovish tone today. The governor was for instance categorical that the changes in liquidity measures announced today does not constitute tightening.
The focus of the policy was clearly on yield management and the announcement of the G-sec acquisition program (GSAP 1.0) is likely to stabilise and support long term yields. Although, the extension of tenures for the VRRR (variable rate reverse repo auctions) might lead to some hardening at the short-end of the curve. The upward revision of the inflation forecast by the RBI is justifiable given rising commodity prices, although we see further upside risks to the current forecast range. That said, inflation is unlikely to be an area of concern for the RBI for the coming months and growth is likely to remain the policy priority.”

Himanshu Jain, VP - Sales, Marketing and CRM, Satellite Developers Pvt. Ltd. (SDPL)
"We anticipated the monetary policy committee (MPC) to keep the repo rate unchanged at 4% and retained the accommodative stance that will still continue to serve the markets well. Some strong liquidity measures were announced in the past quarters and are expected to continue. The earlier announcements by the state government of stamp duty reduction along with reduction on premiums for developers surely gave a boost to the ailing sector and created demand among the homebuyers and we hope such announcements are made in the future as well as the pandemic situation continues."

Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty, Hon. Secretary, CREDAI MCHI
"Given the surge in COVID19 cases and intermittent lockdowns across major cities, we thank the RBI for continuing with their accommodative stance.

We further urge the RBI to take immediate action to arrest the deteriorating health of MSMEs caused due to the regular stop-start nature of business activities and increasing input costs which are having a catastrophic impact on the survival of these businesses."

Kaushal Agarwal - Chairman, The Guardians Real Estate Advisory
"The RBI and especially the MPC needs to be commended for maintaining its accommodative stance for more than a year now. It’s approach, towards tackling the situation created by the pandemic and steps taken to help revive the economy, will go down in History as being one of the finest. Keeping in mind the resurgence of COVID infections across the country, a slight reduction in the key rates would have been widely celebrated. With the temporary reduction in transaction costs being withdrawn, in states like Maharashtra, the expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels."

Dr. Niranjan Hiranandani, National President, NAREDCO
“The unchanged repo rate by the RBI MPC which signals to keep the borrowing momentum buoyant. Also, pegging the real GDP forecast at 10.5 percent reflects Indian economic recovery to be healthy, self-sustainable and resilient.
An additional liquidity facility of Rs 500 billion to all India financial institutions like NABARD, NHB and SIDBI augurs well towards fuelling sustainable growth measures. On the issue of keeping markets ‘in sync’ with its policies, the RBI has done well to convince the market about its stance on growth and liquidity management.
The guidelines on inflation and growth trajectory have mostly remained unchanged despite recent surge in input costs. Extending LTRO for six months translates into continued emphasis on maintaining balanced liquidity in the system by and introducing secondary market G-sec acquisition program 1.0 certainly clearly reflects the commitment to sustain growth momentum in the economy. Extension of Priority Sector lending for NBFC financing towards housing will augment the production outlay.”

Anuj Khetan, Director, Vijay Khetan Group

"Keeping in mind the recent surge in the COVID-19 cases and the restrictions imposed, the monetary policy committee’s decision to keep key rates unchanged at 4% was on expected lines. This move is a much-appreciated step recognizing the role of the real estate sector in generating employment and economic activity. The Union Budget 2021-22 also has provided a strong impetus in favour of the real estate sector. With the interest rates at a record low, the Government will continue taking affirmative measures as long as it is necessary to revive the economy and mitigate Covid-19 impact. With stamp duty reversed back to 5% and real estate sales on the upside, it would boost the banks to further transmit interest rate reduction to end-users to provide further more incentive to renters to eventually turn into homeowners."

Amar Ambani, Senior President and Head of Research – Institutional Equities, YES SECURITIES
“With Bond markets pricing in a status quo well in advance, MPC barely surprised in terms of accommodative stance. All the members of the MPC unanimously voted for no change in policy rates. The central bank reiterated its FY22 real GDP growth projection of +10.5%, while sees inflation trajectory to hover around 5% in H1 FY22. RBI vehemently articulated that that absorption of excess liquidity through reverse repo should not be construed as reversal of accommodative policy stance. RBI governor expressed the need for orderly evolution of yields and will initiate 1 trillion of OMOs during Q1 FY22 to combat extreme volatility. RBI’s liquidity support will certainly help in assuaging market apprehensions given that supply of G-Sec paper will remain elevated on the back of frontloading of market borrowing. For FY22 as a whole, OMO operations are expected to be above INR 3 trillion, similar to FY21 level. Possibility of inclusion of Indian G-secs in the global bond indices will also absorb the supply. Nevertheless, we expect 10year yields to inch higher, possibly trade in the range of 6.2-6.25% in the near term, as there are concerns over stubborn core inflation, resurgent COVID infections, renewed localized lockdowns and relatively higher sovereign yields in US.
Additional measures announced that are positive for smaller HFCs, NBFCs and MFIs were on-tap TLTRO scheme extended by 6 months and additional liquidity support of 500 billion to AIFIs. Key beneficiaries of these measures could be Can Fin, Repco, Home First, Shriram City and MFIs like CREDAG and Spandana.”

Amit Gupta, MD, SAG Infotech

"Our honourable RBI governor had said it right as it would be uncertain to say anything about economic recovery at this point of time especially concerned with the fresh covid spread. Apart from it, RBI has kept almost each & every rate unchanged and I would say it as a wise decision as all the rates were decided on a deep research at the time of the previous year's covid outbreak and now they had not wasted time in again recalibrating the tax rates. While, RBI extending end of day balance to 2 lakh, NEFT to digital payments intermediaries, its optimistic view on mfg firms, urban demand and loosening its monetary policies have really helped a lot to the economy."

Annuj Goel, MD, Goel Ganga Developments

“In the aftermath of the Coronavirus pandemic, the Reserve Bank of India (RBI) has announced the first bi-monthly monetary policy of 2021-22 fiscal. Acting on the expected lines, the RBI has kept the benchmark policy rates or Repo rates unchanged. The Monetary Policy Committee seems to wait for some more time before employing any drastic measure to augment the economic growth. Experts are of the view that the RBI will continue with the accommodative stance in the forthcoming months.
On February 5, 2021, the RBI, headed by Governor ShaktikantDas had kept the key interest rate (Repo) unchanged. The apex bank had sought inflationary concerns behind maintaining the status quo. The present policy recommendations have been announced after a three-day meeting by the Monetary Policy Committee.”

Shraddha Kedia-Agarwal, Head - Marketing & Sales, Transcon Developers
"RBI maintaining status quo on key policy rates was expected given the inflationary concerns in recent months. The low interest rates for the last few months has already given a boost to the real estate sector upticking the demand in the last few quarters and enhancing the confidence of the homebuyers. The decision will help to sustain liquidity for some period as we are already witnessing the derailment of economic momentum due to the current wave of Covid-19 pandemic and lockdowns in different parts of the country. It will also help in sustaining economic stability as well as keep the real estate sector stay afloat during these unprecedented times."

Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance
“RBI’s first monetary policy of FY22 was on expected lines with rates unchanged and accommodative stance retained. The Governor’s underlying commentary was dovish with continued priority on supporting economic revival measures through ample liquidity to all productive sectors. Recognising the key role played by NBFCs in making credit available to the last mile, on tap TLTROs and bank lending to registered NBFCs for on lending to priority sector has been extended by 6 months to September 30, 2021 and this will be particularly useful in supporting & nurturing financial needs of rural economy and semi-urban businesses, micro/small/individual operated businesses amid the current Covid-19 protocols.”

Dr. Alok Sheel - RBI Chair Professor in Macroeconomics at Indian Council for Research in International Economic Relations (ICRIER)
“As expected, RBI has left key monetary policy rates unchanged, as it had to balance the conflicting objectives of upward pressure on inflation and supporting the recovery from the Covid-19 related economic crisis.
These conflicting objectives would need to be balanced going forward as well. RBI expects inflation to remain above 5%, in the upper range of its target of 4% +/- 2% so its concerns on the inflation front are likely to remain. It is significant that it has advised the government to reduce taxes on petroleum products to relieve some of this pressure. It has also flagged concerns surrounding the economic recovery in view of the resurgence of Covid 19. It is pertinent to note that RBI's growth projection of 10.5% for the FY 2021-22 is a full 2 percentage points below what is projected by the IMF in its World Economic Outlook April 2021 global growth projections released just yesterday. The IMF projections do not appear to have factored in the Covid resurgence in India, RBI has.
Another possible monetary policy headache that may lie ahead is the possibility of having to respond to capital outflows arising out of a possible strong US recovery, inflationary pressures and rising interest rates in the US that the IMF has highlighted in the World Economic Outlook of April 2021. Were that to occur, the RBI might well be placed in the unenviable position of having to cope with the 'impossible trinity', of balancing a second set of conflicting objectives, with domestic policy requirements and external policy requirements pulling in opposite directions.
The priority RBI attaches to smooth financing of the government's huge borrowing requirement during the current fiscal also emerges from the monetary policy statement. It apparently does not want the government's borrowing needs to crowd out private borrowers at a time the economy is recovering. It has signalled its willingness to aggressively intervene in markets to support the government's borrowing requirements.
The RBI has adopted an accomodative policy stance for a few years now, but this appears to have been of little help in sparking an economic recovery so far as the transmission channels of monetary policy have been considerably weakened by the large amount of bad loans sitting on bank balance sheets. This issue needs to be resolved expeditiously to improve the potency of monetary policy.”

Anshuman Panwar, Co-Founder, Creditas Solutions
“The first bi monthly policy for FY22 has been on expected lines with RBI keeping repo rate unchanged but re affirming its commitment to maintain an accommodative stance. The central bank has also clearly stated that financial stability remains it's top agenda so that nascent economic recovery becomes more durable in nature. It has backed this with a sizeable gilt acquisition programme in order to keep yields under check. This will also keep interest rates benign and ensure there is no additional pressure on retail borrowers. Further RBI will now set up a committee for a comprehensive review of Asset Reconstruction Companies ARCs. I think this is a much needed step to harness the full potential of ARCs so that the key issue of sizeable bad loans is addressed in a sustained and holistic manner. This is also crucial as economic growth revives and banks need the confidence to lend aggressively.”

Abhishek Jindal, CEO, OwnersTown
"Amid fresh concerns and uncertainties over economic recovery due to the second wave of Covid-19 in India, the RBI has chosen the safe and sensible route by keeping repo rates and reverse repo rates unchanged. Following the Monetary Policy meeting, RBI Governor has talked about the expansion of liquidity, which is likely to impact the nation’s real estate segment positively. Another significant takeaway for the real estate sector is that the apex bank is planning to overhaul Asset reconstruction companies' functioning (ARCs) to help them realize their full potential over the long term. However, it is a bit disappointing to note that the Monetary Policy Committee (MPC) did not take into consideration the urgent need for providing additional working capital on specific project(s)-basis to the developers/real estate builders of the country".

CH. S. S. Mallikariuna Rao. MD & CEO. PNB
“The RBI policy is on expected lines and is overall a good policy to support and nurture the economy amid recent surge in second wave of infections. While liquidity has been ensured via TLTRO in case the demand picks up, the opportunity of onlending through NBFCs, enhancement of loan limit against warehouse receipts, liquidity facility for All Indian financial Institutions are all good moves to ensure continued availability of credit which aid faster economic recovery.”

Satish Gupta, MD & CEO of Paytm Payments Bank Ltd
“The decision by the Reserve Bank of India to increase the limit on maximum end-of-day balance to ₹2 lakh for Payments Banks account holders is a welcome step and will enable us to cater to the growing needs of our customers. Similarly, the increase in the current limit on the outstanding balance in full KYC PPIs from ₹1 lakh to ₹2 lakh will incentivize migration to full KYC PPIs which will further bring financial inclusion across the country. We support an open and interoperable digital payments ecosystem and are looking forward to the detailed guidelines on this subject.”
A. K. Das, Managing Director & CEO, Bank of India
“Policy announcement represents a balanced approach to make economic revival deep rooted.
Policy announcement represents a balanced approach to make economic revival deep rooted, ensure orderly development of financial market and keep price movement at manageable levels.”

Anagha Deodhar – Chief Economist, ICICI Securities
“The MPC’s decision to pause and maintain accommodative stance is along expected lines. However, it retained GDP growth projections for FY22 at 10.5% despite large stimulus in other countries and its potential impact on global growth. In this policy, the biggest announcement was GSAP 1.0 under which the RBI plans to buy government securities worth Rs 1trn in Q1FY22. Along with GSAP, the RBI also announced extension of several liquidity facilities. Together, these measures are aimed at keeping financial conditions benign, ensure orderly evolution of the yield curve and supporting the nascent recovery.”

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory
"The RBI and especially the MPC needs to be commended for maintaining its accommodative stance for more than a year now. It’s approach, towards tackling the situation created by the pandemic and steps taken to help revive the economy, will go down in History as being one of the finest. Keeping in mind the resurgence of COVID infections across the country, a slight reduction in the key rates would have been widely celebrated. With the temporary reduction in transaction costs being withdrawn, in states like Maharashtra, the expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels."

Anuj Khetan, Director, Vijay Khetan Group
"Keeping in mind the recent surge in the COVID-19 cases and the restrictions imposed, the monetary policy committee’s decision to keep key rates unchanged at 4% was on expected lines. This move is a much-appreciated step recognizing the role of the real estate sector in generating employment and economic activity. The Union Budget 2021-22 also has provided a strong impetus in favour of the real estate sector. With the interest rates at a record low, the Government will continue taking affirmative measures as long as it is necessary to revive the economy and mitigate Covid-19 impact. With stamp duty reversed back to 5% and real estate sales on the upside, it would boost the banks to further transmit interest rate reduction to end-users to provide further more incentive to renters to eventually turn into homeowners."

Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty Hon. Secretary, CREDAI MCHI
"Given the surge in COVID19 cases and intermittent lockdowns across major cities, we thank the RBI for continuing with their accommodative stance.
We further urge the RBI to take immediate action to arrest the deteriorating health of MSMEs caused due to the regular stop-start nature of business activities and increasing input costs which are having a catastrophic impact on the survival of these businesses."

REALTORS EXPECTED MORE FROM RBI MPC

The RBI has maintained its accommodative stance until it sees an appropriate time to drive economic growth without jeopardizing its key goal of taming inflation. With the recent increase in Covid 19 incidents, the Apex bank is faced with the challenging task of balancing inflationary pressures to avoid a rise in borrowing costs. To keep inflationary pressures in check and sustain financial stability, it is expected that the central bank to pursue policy normalization in the second half of FY22. While it is understandable that the repo rate remains unchanged, the real estate sector’s need for special steps cannot be overlooked.

Ashok Gupta, CMD, Ajnara India, adds, “The repo rate remains unchanged at 4% which is the sixth time in a row, but we can still expect some support from the Union government and RBI in their upcoming policy meetings to help the industry recover. Its accommodative stance is positive for the real estate sector, which has witnessed some positive movement in demand for the past few months. We can hope that banks will lend strongly to support the sector, leading to the crucial sector in Indian Economy to attract borrowers, as earlier several banks have already provided some exemptions on transaction fees and other related costs.”

Praising the unchanged repo rate step, Vijay Verma, CEO, Sunworld Group, said, “It will continue to give the required liquidity cushion to the sector, where leverage plays an important role. The accommodative stance of the RBI repo rate move to keep it unchanged was much expected because earlier, there were no such announcements made, especially for the real estate sector in the last Union Budget. With this move of RBI, a great relief to the sector in the new financial year is likely to prevail.”

Buyers are returning to the sector after realizing the value of real estate assets backed by historically low EMIs, but developers, too, need some assistance to speed up the development process. “A sector that contributes significantly to the GDP requires assistance, and developers are expressing their concerns for the government to pay attention to their demands,” says Dhiraj Bora, Head Marketing & Communication, Paramount Group.

Because of the global pandemic crisis, the world is suffering one of the worst economic crises, and real estate, among other industries, is feeling the pinch. Harvinder Singh Sikka, MD, Sikka Group, says, “Rates on repurchase agreements are now at record lows, benefiting consumers. However, real estate is undergoing a difficult era, and we hope that the RBI will come out with some direct measures that would help the sector prosper.”

Realtors unanimously say that they expected that the RBI would keep the repo rate unchanged. Throwing light on the RBI MPC decision Uddhav Poddar, MD, Bhumika Group, says, "The Apex Bank has kept its repo rate unchanged, which was in line with expectations. it's clear that the apex bank is taking an accommodative stance. The RBI has played a pro-active role and has taken multiple measures for various industries and sectors in recent months. While the real estate sector needs several measures, and we expect a push from RBI to the banks to disburse loans to the sector".

The need was the influx of funds that could help the developers complete the projects on time and gain the trust of buyers, resulting in the sector's revival. “Last-mile financing is needed in real estate, and unpaid loans are a roadblock; one-time loan restructuring would force banks to accept developers' collateral conditions, allowing developers to complete stalled/delayed projects. The situation in 2008 emerged as a result of the Lehman Brothers crisis, and at the time, loan restructuring assisted in reviving the market, which saw property capital appreciation in 2010 after a two-year lull. We are now in a similar situation, and the sector needs government assistance,” says Dhiraj Jain, Director, Mahagun Group.

Kushagr Ansal, Director, Ansal Housing, adds, “We expect the new lending support of Rs 50,000 crore to Nabard, NHB, and Sidbi to have a positive effect on the liquidity situation. We must realize that the sector needs assistance in coping with unfinished projects to close the demand-supply gap. Since people realized the value of real estate properties, demand is at an all-time high, and the developer community needs the government's support to ensure that everybody has a home.”

Calling for the need to announce direct packages for the sector, Sagar Saxena, Project Head, Spectrum Metro, says, “It is time for the government to pay heed to the sector's long-standing demand for industry status. We foresee the government taking direct sector-specific steps rather than delivering packages with limited effects on real estate.”

Concludes Vikas Garg, Deputy MD, MRG World, “While the government has taken some measures in recent months to help the sector, such as introducing stress funds and stimulus packages, further changes are required to help the sector grow. Without sufficient government funding for developers, it would be difficult to retain real estate demand.”