RBI Monetary Policy Meet Highlights: Central bank keeps repo rate unchanged at 5.15 per cent

"From a real estate point of view, a rate cuts are obviously always welcome as they help improve overall sentiment. Also, lag-less transmission of rate cuts to retail borrowers as RBI has mandated banks to directly link interest rates with repo rates. The expected rate cut of 25 bps would have caused home loan values to fall below 8 per cent for first time ever.

However, it is also true that another rate cut alone would have been insufficient to stir housing sales significantly across budget categories. The previous rate cuts throughout 2019 had almost no perceptible impact on residential sales. In fact, back in 2014, even when the home loan rates were high in two digits at 10.3 per cent, housing sales remained at peak levels.

In the present scenario, only the combined effect of lower interest rates coupled with other measures such as a cut in personal taxes – reportedly being considered by the FM – can actually stimulate residential sales out of their current lethargy."

"The decision to maintain policy rates augurs well for the economy as the recently introduced policy reforms will take time to pan out and materialise. The economy needs to absorb the impact of the recently introduced reforms and the previous rate cuts. The real estate sector is expected to pick up due to the favourable policy incentives and the faster transmission of previous rate cuts.

Moreover, with the inflation already crossing the 4 per cent mark and expected to remain elevated for a few quarters, further rate cuts would have posed an upside risk.

In light of the recently announced reforms doled out by the government, the real estate sector is expected to register higher growth in times to come. Measures brought so far are likely to show their impact. Complementing the corporate tax cuts and the creation of an AIF fund for stressed projects, the government should explore the options of increasing the money supply in the economy. That would not only encourage consumer spending but also stimulate investment flows and higher credit flow which has come down over the quarters."

"With the surplus liquidity in the system, rates have already come down in market. Status-quo on repo rates is in a way positive for banks as they will not have to bring down their lending rates as per new repo rate linked loan pricing. Going forward, we see limited scope of repo rate reductions considering upward pressure on inflation."

"It was an unexpected move with the RBI keeping the repo rate unchanged at 5.15 percent, as the market expected 25 bps cut in repo rate. With the RBI following a inflation targeting regime, the Central Bank focused on maintaining the inflation rate within the target range The rising food inflation posed a challenge to the Central Bank in cutting the rates. For instance, in October, food inflation stood at 6.93 percent. In the same month, vegetable prices registered a YoY growth rate of 26 percent. However, by maintaining the accommodative stance, there is room for rate cuts in the future."

Hike in telecom tariffs could impact core inflation

Service sector activity stayed subdued in October but tourist activities picked up in November

We need to watch the budget to get an indication of the countercyclical measures of the government

The core inflation expected to remain sub 4 per cent

RBI will act on rate cuts if the situation requires so

Won't hesitate to prevent the collapse of any large NBFC

We expect faster transmission of earlier rate cuts hereon

We need some more time to have greater clarity and more certainty in our growth projections

We want the earlier rate cuts to play out fully and do not want to mechanically reduce the rates each time. Whenever there is a rate cut it should have the maximum impact and the ground level

Top 50 NBFCs are being monitored by the RBI

NBFC sector is being monitored regularly. Discussions are done with promoters and management of NBFCs  from time to time.

The MPC feels economic growth has weakened further and the output gap remains negative

There are some indications that CAPEX cycle may be turning up

The government and RBI will work in a coordinated manner to revive growth

Rabi sowing is catching up

THE RBI MPC decided better to wait and take a temporary pause

Global markets have been buoyant on hopes of US-China trade deal resolution

The slowdown in GDP growth has been cushioned by expenditure by the government

Expect the external benchmarking impact to play out in coming months

RBI Governor Shaktikanta Das said that the MPC voted to keep the repo rate unchanged

RBI governor Shaktikanta Das has said there is a persisting weakness in global trade but non-oil export growth returned to positive territory in October, after a gap of 2 months.

Reserve Bank of India (RBI) Governor Shaktikanta Das: As regards the external sector, exports contracted in September-October 2019 reflecting the persisting weakness in global trade but non-oil export growth returned to positive territory in October, after a gap of 2 months. pic.twitter.com/7gAQXItLWm

— ANI (@ANI) December 5, 2019

The RBI has also revised the real GDP growth for 2019-20 from 6.1 per cent in the October policy to 5.0 per cent. The central bank sees 4.9-5.5 per cent in the second half (H2) of the financial year 2019-20 and 5.9-6.3 per cent in  the first half (H1) 2020-21.

The reverse repo rate remains unchanged at 4.90 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 5.40 per cent.

The RBI MPC continued with its "accommodative" stance. It said "as long as it is necessary to revive growth, while ensuring that inflation remains within the target."

RBI keeps the repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15 per cent.