RBI’s pause on policy rates comes as ‘relief’: Assocham

RBI’s pause on policy rates comes as ‘relief’: Assocham

Agency News

New Delhi, Dec 5: Apex industry body Assocham on Wednesday said the Reserve Bank of India decision to keep the policy rate unchanged was on expected lines and comes as a ‘relief’.

The Assocham said escalating trade tensions, tightening of global financial conditions and slowing down of global demand posed some downside risks to the domestic economy, the decline in oil prices in recent weeks, if sustained, will provide tailwinds.

The chamber felt that there was a need to adhere fiscal deficit target to provide a conducive environment for private investment activity.

State Bank of India Deputy MD Prashant Kumar said at present, they did not see any possibility of rate cut by the RBI.

BankBazaar CEO Adhil Shetty also said the central bank’s decision was on expected lines. The 'calibrated tightening' stance ruled out any rate change in the near term. This is because while the high inflation levels have tapered down to a benign 4 per cent, there is continued uncertainty over fluctuating oil prices, escalating trade tensions, tightening of global financial conditions and slowing down of global demand.

“So the RBI would require more time to decide if rates should be cut. Over time, as the global macro-economic factors stabilize, there is a good chance for a rate cut if the inflation holds. For now, your loan EMIs and deposit rates would remain stable,” he added.

Essel Mutual Fund Fixed Income head Killol Pandya said from the market perspective, this policy may be considered to be one which may have short to medium term positive impact.

“RBI MPC remains comfortable with our economic growth & strength of domestic demand,” he said.

He added: “We state our case for investors remaining predominantly in accrual based products for now and venturing towards higher duration products in a calibrated manner. Market participants may remain data dependent and await incoming data giving further clarity on markets, liquidity and rates. We reiterate our view of using trading opportunities to generate additional gains.”

Essel Mutual Fund Executive Director and CEO Rajiv Shastri said 'while the unchanged rates were expected, we are a bit disappointed by the unchanged stance. There has been enough of a transition in macroeconomic realities to move away from the possibility of further tightening. We believe that this is a missed opportunity and hope that it doesn't come in the way of a rate cut in the next policy round, if it is required."

Knight Frank India chairman Shishir Baijal said the decision will be a relief for the real estate industry that has been worried over a possible rate hike adversely impacting the market. Since the last Monetary Policy Committee Meeting, there has been a big relief with the fall in crude prices and the strengthening of the Rupee, thus, reducing inflationary risk.

“We believe the easing inflation situation and the need to actively support growth are the primary consideration for the MPC to maintain a status quo on rates.”

Earlier in the day, the RBI kept the benchmark repo rate unchanged at 6.50 per cent and Reverse Repo rate at 6.25 per cent. The RBI MPC, in its three-day by-monthly monetary policy statement, kept its stance unchanged at 'calibrated tightening'.

Repo rate is the rate at which banks borrow short-term funds from the Reserve Bank of India.

The committee also decided to cut the Statutory Liquidity Ratio (SLR) to 18.0 per cent from 19.5 per cent earlier. Starting the January-March quarter, SLR will be cut by 25 basis points each quarter in order to align it with the liquidity coverage ratio. This was the fifth bi-monthly monetary policy for 2018-19. (UNI)