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

RBI Monetary Policy December 2019 Highlights: The Reserve Bank of India (RBI) kept its repo rate unchanged at 5.15 per cent.

By: Express Web Desk | New Delhi | Updated: December 5, 2019 4:52:15 pm
RBI has kept its repo rate unchanged at 5.15 per cent while lowering its GDP forecast.

RBI Monetary Policy December 2019 Highlights: The Reserve Bank of India (RBI) on Thursday kept its repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15 per cent, while maintaining an “accommodative stance”. This is the first bi-monthly monetary meeting this year in which the repo rate has been kept unchanged.

The central bank had been cutting the key interest rates at every MPC meeting since Shaktikanta Das took over as the Governor of RBI last December. In the five reductions so far this year, the interest rates have been reduced by a total of 135 basis points on concerns that growth momentum is slowing down and to boost liquidity in the economy.

RBI has also cut the GDP growth forecast for 2019-20 to 5 per cent from 6.1 per cent in its October meeting.

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RBI keeps its repo rate unchanged. Here are the highlights of the central bank's Monetary Policy Committee (MPC) meeting:

14:17 (IST)05 Dec 2019
Dhiraj Relli, MD & CEO, HDFC Securities on RBI monetary policy outcome

"The Outcome of the MPC meet of the RBI indicates that the RBI is worried about the rising inflation which may not come down till atleast February 2020 and GDP may not rise materially till Q4FY20 as domestic and external demand conditions have remained weak. Hence it thought prudent not to cut rates at this juncture. Instead it has nudged the Govt to cut interest rates on small savings scheme so that interest rate transmission becomes faster. Capacity utilization that has touched a low of 68.9% in Q2FY20 needs to revive soon. It has also tightened norms for UCBs. Though the stock market participants could be disappointed by the no-repo-rate-cut action, we think that the participants are mature enough to understand the prudence of the Central Bank which means that the markets may not react downwards sharply due to this disappointment."

13:53 (IST)05 Dec 2019
Anuj Puri, Chairman – ANAROCK Property Consultants on RBI repo rate decision

"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."

13:49 (IST)05 Dec 2019
Ramesh Nair, CEO & Country Head – India, JLL on RBI monetary policy outcome

"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."

13:33 (IST)05 Dec 2019
Anusha Raheja, BFSI Research Analyst at LKP Securities on RBI Monetary Policy Committee review

"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."

13:18 (IST)05 Dec 2019
Deepthi Mary Mathew, Economist at Geojit Financial Services on RBI MPC outcome

"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."

12:57 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

Hike in telecom tariffs could impact core inflation

12:56 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

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

12:54 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

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

12:53 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

The core inflation expected to remain sub 4 per cent

12:53 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

RBI will act on rate cuts if the situation requires so

12:50 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

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

12:50 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

We expect faster transmission of earlier rate cuts hereon

12:46 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

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

12:43 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

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

12:41 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

Top 50 NBFCs are being monitored by the RBI

12:40 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

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

12:38 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

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

12:36 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

There are some indications that CAPEX cycle may be turning up

12:31 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

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

12:30 (IST)05 Dec 2019
RBI governor Shaktikanta Das:

Rabi sowing is catching up

The GDP growth of 4.5 per cent is the worst growth rate in over six years and this will increase the pressure on RBI to look for methods to boost liquidity in the economy, which in turn will boost the spending power of the people in the market and ensure enough credit for industries to produce more.

"It is expected that RBI will go for a rate cut by 25 bps, and maintain its accommodative stance. Though the inflation rate has crossed the 4 per cent target rate in October, RBI’s major focus will be on growth revival. With the growth rate slipping to 4.5 per cent for Q2FY20, there will be more pressure on the Central Bank for monetary easing. Transmission of rate cuts still remains an issue as the positive effect of the five consecutive rate cuts is not visible in the economy," Deepthi Mary Mathew, Economist at Geojit Financial Services said in a statement earlier this week.

The RBI's lending rates are seen to be directly linked to the interest rates on deposits and loans charged by banks, and hence each time the central bank cuts its repo rate (key lending rate), it is said that popular loan schemes such as home loans and car loans get cheaper.

And while loans get cheaper for the people, the banks also reduce the interest rates on deposits.