RBI All-Time Low Repo Rate
In its 8th straight cut, RBI cut key interest rates by 40 basis points, citing negative GDP growth and expected hardening of inflation in the first half of the fiscal year. The RBI also allowed lenders to extend an ongoing moratorium on loan repayment, which was due to end on May 31, by another three months to August 31.
Jaxay Shah, Chairman, CREDAI National welcoming the three months extension in moratorium stated, “The extension should have been for a years’ time. It’s evident from RBI’s announcement that there has been a negative growth .The advantages extended by the RBI through reducing the repo rates are not being passed on by the banks to the customers. We are hoping for a quick transmission of these actions in banks’ respective lending rates.”
Expressing similar sentiments, Dr. Niranjan Hiranandani -President Naredco & Assocham and Co-Founder & MD, Hiranandani Group said, “RBI’s proactive measure will help revive economy and industry welcomes the extension of term loan moratorium till August 31st. The lending institutions are being permitted to restore the margins for working capital to the origin level by March 31, 2021. This is a step in the right direction. Also, converting the accumulated interest for the moratorium period into a term loan will provide some relief as the borrower will not have to immediately repay the accumulated interest on the loan after the moratorium ends.”
Sushil Mohta, Chairman, Merlin Group and President, CREDAI West Bengal expressing his disappointment said, “Rates on Home Loans, construction loans, and loan against rental must be reduced, an industry which provides millions of jobs and revenue is completely ignored.”
Satish Magar, President, CREDAI National expecting more stringent measures from the RBI booster to revive the economy stated, “The move of moratorium extension is a short term piecemeal solution to a long term problem. The interest rate should be reduced with firm liquidity measures as this is the need of the hour. RBI has tried to ease the pressure on borrowers and has extended group exposure limit for lenders to corporates from 25% to 30 % but this is not enough to solve the ongoing liquidity crisis. Government now needs to ensure that banks are forthcoming and are passing on the benefits to us.”
Rohit Gera, MD, Gera Developments shared his view, “The move by the Reserve Bank is welcome however banks have been reluctant to reduce lending rates proportionately for similar actions by the RBI in the past. Mortgage rates have come down 50 to 70 basis points while the repo rates have dropped by over 200 bps. Unless the RBI strictly monitors and pushes banks to transmit these rates cuts to the borrowers, the move will not have the required impact on the economy.”
Anshuman Magazine, Chairman & CEO – CBRE India, South East Asia, Middle East & Africa stated, “The RBI’s move to cut repo rate by 0.4 basis points will have a positive effect on the residential property market. This is a clear step towards reducing lending rates, encouraging liquidity, preserving financial stability and supporting overall economic growth.
Sharing the similar view, Anuj Puri, Chairman – ANAROCK Property Consultants stated, “The hard facts of declining consumption and a deepening economic slowdown in India are inescapable. All sectors including real estate have been severely impacted. To this gloomy backdrop, the RBI’s repo rate cut of 40 bps – from 4.40% to 4% now – is a welcome move. The rate cuts combined with the further extension of loan moratoriums by 3 months up to August 31, 2020 augurs well for the real estate sector in the times to come.”
Manju Yagnik, Nahar Group expressed, “With RBI announcing rate cuts, thus maintaining the ‘Accommodative Policy’ stance is a big positive as it indicates their intent to ease the EMI burden of the customers. RBI estimates that GDP growth may be negative for FY21 but, the fact that monetary policy transmission is improving coupled with the expectation of normal monsoon which will spur economic activities.”