NEW DELHI: Analysts and economists believe that the announcements made by the Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday will ensure liquidity in the financial markets, availability of debt to specific sectors and push the current low credit growth going ahead.
Maintaining the status quo for the second time in a row, the apex bank on Friday decided to keep the key interest rate unchanged at 4 per cent. However, the RBI assured that it would continue with accommodative stance as long as necessary. Market watchers believe that there is a scope of up to 50 basis points rate cut going ahead.
Here is what the analysts had to say:
Amar Ambani, YES Securities
MPC clearly delivered accommodative moves through non-interest rate tools. As an endeavour to lower the yields in bond markets, the central bank said it will expand weekly OMO purchases, include State Development Loans as part of its purchases and conduct TLTRO of Rs 1 lakh crore. We believe, over time, G-Sec 10-year yield will drop closer to 5 per cent. Rationalization of risk weights on individual housing loans, now linked only to loan-to-value (LTVs), for all new housing loans sanctioned till March 2022, is positive for banks. But no mention of housing finance companies may be a near-term dampener for housing finance stocks. We see the possibility of the further scope of 25-50 basis points cut in repo policy rates.
VK Vijayakumar, Geojit Financial Services
Though the policy rate remains unchanged, it was a very dovish policy announcement. Rationalisation of risk weightage of home finance companies is an innovative initiative which will bring home loan rates down. This will be a boost to the real estate sector and housing companies. The new MPC’s first policy announcement is a fine example of being dovish without cutting rates. The positive response of the bond market with sharp cut in yields is a reflection of the success of the policy.
Shishir Baijal, Knight Frank India
Measures like rationalisation of risk weights to all new housing loans until March 2022 would give a fillip to housing loan growth. The RBI has also extended the scheme for co-lending to all NBFCs and HFCs which will ease credit availability for the real estate sector.
Suman Chowdhury, Acuité Ratings & Research
In the context of increased concerns on higher bond yields and higher government borrowings, RBI has given out a strong message that it will manage yields in an aggressive manner through larger open market operations (OMOs) which will also cover state development loans (SDLs). This along with an expectation of moderation in inflation over the next few months is expected to keep 10-year G-Sec yields at sub 6 per cent levels and also facilitate higher borrowings by the states in the near term.
Harshad Chetanwala, MyWealtGrowth
Historically the interest rates in India have not remained low for long. However, with limited visibility of economic recovery and lot of sectors continuing to remain fragile, RBI continues to support growth and kept key rates unchanged. The central bank continues to tolerate low-interest rates despite high inflation, indicating that an increase in interest rate will be slow and gradual pace until the pace of recovery improves.
Asutosh Mishra, Ashika Institutional Equity
RBI again went out of the way and surprised the market by announcing many important non-monetary policy reforms, which will be an important milestone from the bond market perspective. Risk weight for housing loans linked to LTV for all new housing loans is a big positive and will push new housing sales.
Dhruv Agarwala, Housing.com, Makaan.com and Proptiger.com
Rationalising risk weightage on home loans and linking it to Loan to Value (LTV) ratio will effectively result in higher credit flow to the real estate sector, which is positive news for the sector. Also, the hike in credit limit for retail exposure by a single lending entity from Rs 5 crore to Rs 7.5 crore is a welcome move that will immensely help both retail as well as small businesses.
Anshuman Magazine, Middle East & Africa
RBI’s decisions to relax LTV guidelines and rationalize risk weights for home loans will further encourage home buyers and their review of the co-origination model between banks and NBFCs and extended the scheme to all NBFCs (and banks) will improve the flow of credit in the economy. These measures will strengthen recovery in residential demand and support construction activity as well.
