'Right Step To Assess Impact': Industry Players Share Views on RBI's Rate Pause

However, the central bank has not ruled out hiking interest rates again if need be.

3 min read
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After raising the repo rate six times in a row, the six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to keep the lending rate unchanged at 6.5 percent.

The central bank's Governor Shaktikanta Das made the announcement on Thursday, 6 April.

The repo rate is the interest rate at which central banks lend money to commercial banks that are low on funds, so that they can meet the minimum reserve requirements. It is used as a means to manage inflation or deflation.

So, what does it mean when the repo rate stays the same? The RBI's policy action will promote growth amid concerns that consumption and private investment is falling, The Indian Express reported.

Here's what industry players had to say on the central bank's decision to keep it steady.


'Further Hike Would've Affected Growth'

Commenting on the RBI’s monetary policy, Federation of Indian Chambers of Commerce & Industry (FICCI) president Subhrakant Panda, said, "The pause in policy repo rate by RBI is a welcome move given the evolving macro-economic and financial markets scenario. The renewed phase of turbulence that Central Banks are grappling with globally given developments in the banking sector, geo-politics and slowdown in growth & trade flows warranted a prudent response which RBI has delivered."

"While the Indian economy is showing signs of resilience with growth being broad based, the outlook globally is somewhat uncertain. RBI’s measured stance articulated today is appropriate as earlier rate hikes are still flowing through the system, and inflation is projected to trend downwards, albeit slowly; any further hike in the policy rate at this juncture would have affected growth, which must be the priority while keeping a close watch on the inflation trajectory."
Subhrakant Panda, FICCI

'Policy Rate Will Provide Some Respite'

Dr Samantak Das, the chief economist at property investment firm JLL India, welcomed the central bank's decision to maintain status quo. "This is the right step to assess the impact of the previous six consecutive rate hikes working their way through the current inflationary cycle and overall economy," he said.

"India’s residential markets have maintained their trajectory with the first quarter of 2023 registering robust sales growth of 20% y-o-y while also hitting a 15-year high. A new wave of optimism with improving consumer confidence is seen resulting in rising sales due to sustained buying. Given that the affordability synergy was under challenge with home loan EMIs rising by 15-17% from April 2022 and home prices also increasing during the same period by 4-12%, the current status quo in policy rate will provide some respite. This should positively support the current home-buying sentiment."
Dr Samantak Das, JLL India

'RBI Hasn't Ruled Out Further Rate Hikes'

Axis Securities PMS Chief Investment Officer Naveen Kulkarni revealed that the RBI's decision caught him off guard. "While the pause is purely for this policy, the regulator has not ruled out any further rate hikes, if need be, and would be largely data-driven," he said.

"We expect the systemic credit growth to remain buoyant for the Mar’23 quarter. However, management commentaries on growth momentum sustenance going into FY24 would be crucial. While banks have seen a sharp NIM expansion so far, headwinds on margins will surface as banks step into FY24.”
Naveen Kulkarni, Axis Securities PMS

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Topics:  Inflation   Business   Repo Rate 

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