RBI Monetary Policy August 2021: Know who said what after no change in benchmark interest rate - Check reactions

The Reserve Bank of India (RBI) on Friday decided to keep benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance as the economy is yet to recover from the impact of second COVID wave.

This is the seventh time in a row that the Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das has maintained status quo. RBI had last revised its policy rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.

MPC decided to maintain status quo, that is keeping benchmark repurchase (repo) rate at 4 per cent, Das said while announcing the bi-monthly monetary policy review. Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with RBI.

Das said MPC voted unanimously for keeping interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target.

MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.

Observing that economy is slowly recovery from brief hiatus, the Governor said, some of the high frequency indicators reflect recovery. 

Know who said what after no change in benchmark interest rate - Check reactions:-

Dinesh Khara, Chairman, SBI

"The RBI policy is pragmatic and strikes a fine balance between stance and strategy. While the policy stance continues to be accommodative to continuously support growth, a strategy of careful recalibration of liquidity management is clearly indicated with the roll out of VRRR. The policy has also nudged banks to shift to an alternate reference rate with the discontinuation of LIBOR. The extension of on-tap TLTRO scheme and the deferral of deadline for meeting the operational parameters for stressed entities will help corporates navigate through the pandemic with a degree of certainty."

Y. Viswanatha Gowd, MD & CEO of LIC Housing Finance

'The economy is still in the recovery phase and showing similar signs of revival we witnessed last year post the first wave. RBI retaining the GDP growth target further exemplifies this fact. The accommodative stance and unchanged lending rates indicate that the RBI will continue with the growth-supporting measures which may help tide over disruptions. A continuation of low interest rate regime works well for borrowers. A good opportunity for homebuyers advance their home buying decision.’

Siddharth Mehta, Founder & CIO at Bay Capital Investment Managers  
 
“The RBI policy is along expected lines and it is encouraging to see that the MPC is focussing on growth and that the monetary stance is maintained keeping in mind the fact that any change might hamper the process of economic recovery following the shock from the pandemic. It is also encouraging to note that the recent spike in inflation readings are thought to be transitory driven by supply side constraints. Overall, these comments augur well for the economy and the financial markets and as long term investors we continue to be very excited by the India story. We are particularly enthused by the digital transformation that is underway in India and the investment opportunities in India’s internet / digital ecosystem as a result of this transformation.’’

T Chitty Babu, Chairman and CEO, Akshaya Pvt Ltd

“The Reserve Bank’s accommodative stance will help maintain the higher demand seen in real estate in the last 2 months. With home loans interests still remaining at record low rates, real estate today is seeing a lot of pent-up demand coming to the fore, and the offtakes are poised to improve further in the next few months, leading up to the festive season.”

Indranil Pan, Chief Economist – YES Bank 

"RBI has attempted and managed to balance the contradicting objectives of managing inflation expectations while also communicating the need for sustained policy accommodation. Even as the inflation forecasts for the current FY have been raised, the communication continues to be that the hump in inflation is supply-led and thus ‘transitory’ wherein the demand side push for inflation is almost absent. This is the reason for RBI to have been able to see-through the current high inflation levels. RBI continues to highlight that any pre-emptive tightening can kill the nascent and hesitant recovery that is taking shape. In cognizance with an extremely uncertain growth climate, we think that the RBI will maintain its accommodative policy and not move on any form of tightening – be it on the rates side or on the liquidity side – till the end of the current FY."

Vinit Dungarwal, Director, AMs Project Consultants Pvt. Ltd.

As was widely expected, RBI in its Monetary Policy Committee bi-monthly meeting, kept the repo rate unchanged at 4 per cent. From a real estate point of view, keeping the interest rates unchanged is a welcome move as it will help in demand creation. However, the Consumer Price Index inflation rate of more than 6% for May-June was beyond the RBI’s (RBI’s) tolerance mark. Hence, steps will have to be taken to keep the inflation in check and continue the growth momentum that the economy has gained post the second wave. For the real estate sector to have a strong H2, the low-interest rates offered should continue preferably till the end of the year.

Aditya Kushwaha, CEO and Director Axis Ecorp

Despite the recent spikes in inflation, RBI has decided to maintain the status quo on the repo rate for the seventh consecutive time. By doing this, RBI has sent out a strong signal that growth is important. It has also maintained FY22’s GDP growth forecast at 9.5 per cent, which is another positive sign. The second wave had cast a major impact on the homebuying sentiment. However, the activity has started gaining momentum in the real estate sector in the last month. The home loan interest rates are at a historic low, the real estate players are extremely optimistic about the festive months with renewed confidence.  Keeping these rates unchanged will prompt more buyers to invest in secured assets like real estate. For the upcoming season, real estate players including us are looking forward to launching new projects.

Sandeep Runwal, Managing Director, Runwal Group, President-Elect, NAREDCO Maharashtra

The RBI has declared the accommodative policy stance amid the fears of the expected third wave of the pandemic yet again. It is imperative that low mortgage rates would continue for at least some more time now or maybe until the end of the year. This will provide the required fuel for the growth of the economy along with the real estate industry with which several other allied sectors are linked. Apart from the low-interest rates, the consumers' realization of owning a home along with the stamp duty cut in the key markets were the growth drivers for the real estate sector in the past few quarters and the strong demand is expected to continue going ahead. 

Vikas Wadhawan, Group CFO, Housing.com, Makaan.com and Proptiger.com

On widely expected lines, the RBI on August 6 decided to maintain a status quo on key policy rates. The decision of the RBI MPC augurs well for the real estate industry in general and home buyers in particular, since the record low-interest rate regime would enable a large number of buyers to invest in property. Since homebuyer sentiment has already improved in recent times, based on an increase in housing affordability in India, the RBI move will prompt buyers and investors to put their money in secured assets like real estate. The extraordinary liquidity support the RBI has provided to the economy in the aftermath of the coronavirus pandemic is highly commendable.

Nitin Purswani, Cofounder of Medius.AI

"The RBI appears to be more focused on restoring the economy following the covid period, as evidenced by the repo rate being constant. Demand has yet to come up, and given the economy's performance over the last two years, it's critical that we focus on reviving it."

Abheek Barua, Chief Economist, HDFC Bank

The RBI has continued with its line of supporting growth despite the recent spikes in inflation. That said, recognizing the concerns around inflation (RBI revised up its inflation forecast to 5.7% from 5.1% for FY22) and the excess build-up in systemic liquidity over the last month (at INR 8.5 lakh crore as of 4 August), we saw the central bank take its second step towards liquidity normalization. The first being the tolerance towards some upward adjustment in the 10-year yield in July.
The RBI announced an increase in the quantum of variable reverse repos (VRR) by INR 2 lakh crore and also provided forward guidance on systemic liquidity to be close to INR 4 lakh crore by September-end. In response to tighter liquidity conditions, we expect short term rates to increase and return on instruments like CPs to rise. That said, this liquidity normalization should be viewed as a gentle calibrated move, partly in response to large excess liquidity surplus in the system, and not as an aggressive roll-back of monetary policy support.

With regards to the bond yield curve, while the 10-year yield is likely to inch up in response to the policy announcement today, the uneven structure of the curve could persist unless there are more evenly distributed interventions, across the curve, through G-SAP, OMOs, Operation Twists by the central bank.

Nishant Deshmukh, Founder and Managing Director, Sugee Group

“The RBI’s decision to maintain an accommodative stance has invoked a sense of optimism. The Repo Rate and Reverse Repo Rate remains unchanged at 4% and 3.35% respectively. This will act as a huge catalyst to infuse sufficient liquidity in the economy. The sector is recovering from the disruptions caused by the Covid-19 pandemic and with this measure, it will bring about a drive in the market and tame the inflation in the system. Lower home loan rates will definitely be a boon to enhance homebuyers' buying sentiments and encourage fence sitters to purchase their dream homes. This move, along with the government’s ambitious proposal to boost affordable housing, will aid to bring about a strong momentum in the segment and reconcile the economy. We expect the banks to pass on the benefits of these rates to the homebuyers and improve the revival of the real estate sector.”

Anagha Deodhar – Chief Economist, ICICI Securities

While the MPC’s rate action was along expected lines, the VRRR decision and one committee member voting against accommodative stance were early signs of normalisation. It upped inflation forecast for FY22 to 5.7%, a tad higher than our expectation and retained growth forecast at 9.5%. We expect the normalisation to continue with the RBI hiking reverse repo rate in two steps starting early next year. Commenting on growth outlook, the committee said accelerated pace of vaccination, expected pick up in government expenditure, the recently announced relief package by the government and easy financial conditions are expected to aid revival. On inflation, it said the current inflationary pressures are assessed to be driven by supply shocks and hence transitory. It also added that cutting fuel taxes can lessen the cost pressures.

Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa, CBRE

“The RBI’s continued maintenance of an accommodative stance will help sustain homebuyer sentiments. The continued low repo and reverse repo rates (4% and 3.35% respectively) would mean that homebuyers would continue to secure loans at low rates, thereby boosting residential sales.

We also welcome the RBI’s announcement of resuming fortnightly VRRR auctions, which will further ensure that the market’s need for sustained liquidity is met.”

 Lakshmi Iyer, CIO (Debt) & Head Products, Kotak Mutual Fund
 
“The RBI MPC left key rates unchanged – on expected lines. The accommodation bias was maintained too, however with 5-1 (1 member dissenting). The Variable rev repos (VRRR) amt was also graded increased from INR 2 tn to INR 4tn over next 1 month. This policy has embarked on liquidity normalisation as a start point, being mindful of growth drivers as well. We could see the yield curve gradually flatten with shorter end moving up tad faster than longer end. Markets could start pricing in possibilities of rev repo rate hike, though the policy refrained from any such guidance.”

Rajiv Sabharwal, MD & CEO, Tata Capital Ltd.

"The decision of maintaining rate status quo and continuing with the accommodative policy stance once again demonstrates RBI’s unwavering resolve to support growth in the economy. The rebound in the economic activity post the second wave has been faster and it is imperative to build on this momentum.  The RBI has taken note of the broad based pattern of rising inflation due to adverse supply shocks and global increase in commodity prices. However, at this juncture, growth concerns outstrips the evolving inflation dynamics. The systemic liquidity continues to remain surplus supporting rate transmission and maintaining the southward bias of the rate curve. The bond market anticipates normalisation of liquidity in the near future. It is important that the impact of the same will be absorbed without bringing volatility to the rate curve. The RBI is cognizant of sectoral asymmetry in credit transmission. The extension of on-tap TLTRO scheme and MSF for banks should further channelize credit flows."

Dr M Govinda Rao, Chief economic advisor

“As expected by BWR, the RBI revised upwards the full year (FY22) inflation outlook from 5.1% to 5.7% with similar upward revision in quarterly outlook.  The RBI feels that the inflation breaching the upper limit of the band in May and June is transitory, it will be elevated at an average of 5.7% during the year.   The continued accommodative stance highlights RBI’s priority on sustaining growth recovery. However, as price stability continues to remain a concern, the tone of MPC turned a bit cautious compared to its previous MPC. Along with ensuring adequate liquidity to facilitate the government borrowing programme the RBI has announced some measures to rein in the control excess liquidity as well. Inflation outlook of 5.7% is certainly a high projection on the back of prevailing uncertainty over crude oil prices and rising cost of import of edible oils which hold key for future price movements. The better monsoon outlook may moderate food inflation though the increase in edible oil prices and transportation cost arising from elevated prices of petroleum products pose risks. With most of the high frequency indicators providing better recovery prospects, the RBI has revised upwards its Q1FY22 GDP estimates by 2.9 percentage points to 21.4%, while keeping the full year projections at 9.5%. Overall, we could expect a better clarity on future guidance on growth and inflation outlook in the October MPC meeting. With the 5-1 vote to continue with the accommodative stance of the MPC, there is some caution though there is no possibility of immediate policy reversal. We expect the RBI to continue with the accommodative stance till the growth recovers”.

Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance

MPC has shifted its policy tone, reflecting the ever evolving dynamics of Inflation and growth, wherein the spectre of rising inflation and growth recovery is getting more pronounced. Today’s policy verdict can be perceived as a slight deviation from the hitherto ‘Dovish stance‘, as exemplified by MPC’s inflation forecasts being nudged higher. While the absorption of liquidity under VRRR window is set to increase in a calibrated manner pointing to unleashing of the gradual liquidity normalization process, however the reassurance to continue with its liquidity measures such as GSAP’s OMO’s OT’s etc would keep the bond market apprehensions at bay. Liquidity and credit push measures in terms of extension of MSF relaxation and extension of On Tap TLTRO will aid the credit growth in the system.

Anjana Potti, Partner, J Sagar Associates

“The monetary policy reflects the overall market sentiment of ‘wait and watch’ with the projected GDP, inflation and liquidity being more or less constant. The MPC believes that continuing the accommodative stance will nurture the emerging and cautious recovery in the domestic economy in the relatively uncertain financial environment(where the pace of global recovery is being reined in by the resurgence of infections ) – which will go a long way in turn to reduce the  uncertainty in the market factors for investors. In keeping with the accommodative stance, the RBI has also extended the TLTRO and  marginal standing facility up to September 30, 2021 and December 31, 2021 respectively continuing to ease liquidity pressures on NBFCs and banks and boosts access to funds by the market. Considering the impact that the transition from LIBOR will have on the financial market, the RBI has decided to amend the guidelines related to export credit in foreign currency and restructuring of derivative contracts to permit the adoption of a widely accepted  alternative reference rate in the relevant currency. As a consequence of such impending amendments  the transition to an alternative reference rate  will not be treated as a ‘restructuring’ under the  ‘Prudential Norms for Off-balance Sheet Exposures of Banks – Restructuring of Derivative Contracts’. "

Jyoti Prakash Gadia, Managing Director, Resurgent India

As anticipated, the Reserve Bank of India has kept the policy rates unchanged. This has been prompted by the expectation that inflation and price Momentum shall soften, once the adverse supply-side issues are taken care of, post the recovery from the second wave.

RBI has also indicated the likely emergence of green shoots based on quick indicators relating to consumption investment and foreign demand which has guided the status quo on stance.

A need to keep an observant eye on inflation has been highlighted with a revised inflation target raised to 5.7 % from 5.1 %. The accommodative stance is to continue with an aim to nurture a growth expectation of 9.5 for FY  2022  a robust target of 17.2% next year.

 For better management and absorption of liquidity, the quantum of variable rate reverse repo (VRRR) auction 1.50 lacis is a step in the right direction considering the current liquidity trends.
All in all the policy is on expected lines with a need to keep our fingers crossed on the emerging growth - inflation matrix.

Bekxy Kuriakose, Head – Fixed Income, Principal Asset Management

At its Review meeting conclusion announcement today, RBI MPC kept key rates unchanged and stance at accommodative as was widely expected. Pace of moderation in global economic activity, improving but still weak domestic demand overcast by the pandemic and need to nurture nascent and hesitant market recovery were cited as the key reasons. It’s interesting to note that the accommodative stance was not entirely unanimous like last time but had a single dissent vote. While expressing surprise and concern at the recent inflationary pressures, RBI MPC is hopeful that the monsoons coupled with recent softening in global crude oil prices and supply side measures by government should help to reduce inflation in the coming months. Taking note of these concerns however and the increase in banking system liquidity thanks to RBI intervention in forex and gilt markets, the most significant announcement has been to increase the quantum of VRRR (Variable Rate reverse repo) auctions from the present fortnightly Rs 2 lakh cr to Rs 4 lakh cr in a graded manner till September 2021. 

Other relief measures include extension of On tap TLTRO scheme till Dec 31st, 2021 as well as MSF relaxation upto same date. 

Given the announcement on VRRR front, we expect that going forward in next two months we may see rise in short term Tbill, CD/CP rates upto 1 year maturity as higher amounts get locked into VRRR. Overnight rates (in form of TREPs) which were recently trending towards 3% should come closer to the reverse repo band of 3.35%. While gilt prices have reacted negatively post the announcement and yields have gone up 3-4 bps, given RBI’s reiteration and commitment for orderly evolution of yield curve and continued support in form of G-Sap, other OMOs and auction interventions we do not expect sharp rise in medium to long end yields. We would advice investors to direct new allocations towards short term category of funds. 

Vikas Wadhawan, Group CFO, Housing.com, Makaan.com and Proptiger.com

On widely expected lines, the RBI on August 6 decided to maintain a status quo on key policy rates. The decision of the RBI MPC augurs well for the real estate industry in general and home buyers in particular, since the record low interest rate regime would enable a large number of buyers to invest in property. Since homebuyer sentiment has already improved in recent times, based on an increase in housing affordability in India, the RBI move will prompt buyers and investors to put their money in secured assets like real estate. The extraordinary liquidity support the RBI has provided to the economy in the aftermath of the coronavirus pandemic is highly commendable.

Uddhav Poddar, MD, Bhumika Group

While a stable repo rate is appropriate, the need of the hour is industry-specific measures. We need to keep the buyers motivated, especially when the festival season is approaching. The requirement was to decrease the interest rates further to rekindle demand, making homes and real estate assets more appealing with low EMIs.

Manoj Gaur, CMD, Gaurs Group and Vice President - North, CREDAI National

The unchanged repo rate decision by the RBI is on the expected lines; the Apex bank maintained the accommodative stance that is the need of the hour. However, the real estate sector has been expecting sector-specific measures that could trigger healthy growth. Although the government has taken some steps to help the sector in recent months, additional reforms are required to allow the sector to thrive. The upcoming festival season will likely bring in more demand, and we are hopeful that the low home loan interest rate will make the buyers go for real estate assets.

Pradeep Aggarwal, Founder & Chairman, Signature Global, and Chairman, National Council on Affordable Housing, ASSOCHAM

We appreciate the apex bank's continued accommodative stance. Real estate has made a strong demand for low house loan interest rates, and the RBI has helped the sector by maintaining the status quo. We recommend that customers take advantage of the current scenario because, in the future, prices may rise due to higher raw material costs.

Mahendra Jajoo, chief investment officer—fixed income, Mirae Asset Investment Managers.

As expected, MPC kept key policy rates unchanged and retained monetary policy stance. Inflation expectations have been increased by about 50bps while growth projection have been retained unchanged at 9.5%.  Policy stance remains committed to supporting growth revival as long as its required. With increase in variable rate reverse repo amounts, one would expect an orderly transition to a normalized monetary policy without any major disruption and that remains the highlight of the policy allowing for a smoother risk management framework for market participants.

Debt funds are expected to continue to benefit from the accommodative policy stance and may be better equipped to deal with any future hike in rates without any major violent phase. Shorter maturity oriented schemes may find better traction under current atmosphere. Money market Funds investing primarily in high credit quality money market instruments of up to 1 year along with other similar category funds may attract more attention from investors.

Abheek Barua, Chief Economist, HDFC Bank 

The RBI has continued with its line of supporting growth despite the recent spikes in inflation. That said, recognizing the concerns around inflation (RBI revised up its inflation forecast to 5.7% from 5.1% for FY22) and the excess build-up in systemic liquidity over the last month (at INR 8.5 lakh crore as of 4 August), we saw the central bank take its second step towards liquidity normalization. The first being the tolerance towards some upward adjustment in the 10-year yield in July. 

The RBI announced an increase in the quantum of variable reverse repos (VRR) by INR 2 lakh crore and also provided forward guidance on systemic liquidity to be close to INR 4 lakh crore by September-end. In response to tighter liquidity conditions, we expect short term rates to increase and return on instruments like CPs to rise. That said, this liquidity normalization should be viewed as a gentle calibrated move, partly in response to large excess liquidity surplus in the system, and not as an aggressive roll-back of monetary policy support. 

With regards to the bond yield curve, while the 10-year yield is likely to inch up in response to the policy announcement today, the uneven structure of the curve could persist unless there are more evenly distributed interventions, across the curve, through G-SAP, OMOs, Operation Twists by the central bank.

Churchil Bhatt, EVP Debt Investments, Kotak Mahindra Life Insurance Company Limited
 
“While the MPC has decided to maintain status quo on key policy rates and voted 5-1 in favour of continuing with accommodative stance in this meeting, it has also taken few expected steps towards normalisation of excess system liquidity. A phased increase in the quantum of Variable Rate Reverse Repo operations to INR 4 trillion is one such measure that in our view marks the beginning of a cautious withdrawal of exceptional, post-Covid accommodation. However, with continuing emphasis on orderly evolution of yield curve and ongoing support via GSAP, OMOs and OT, markets are expected to take these measures in to its stride. Going forward, we continue to expect further baby steps towards rate and liquidity normalisation as economy continues to improve.”

Amar Ambani, YES SECURITIES"

"RBI unanimously and as expected, voted to keep repo rates unchanged and stuck with an accommodative monetary policy. The Central bank remains of the view that any pre-emptive policy normalization could jeopardize growth recovery.  RBI acknowledges inflationary pressure, but cites them as transitory, manifested by some moderation in core inflation. On government borrowing costs, RBI is conceding to the recent rise in yields and has termed it as orderly evolution. The Central bank will persist with its OMO in secondary markets to further anchor the yield expectations.

We infer that RBI is likely to stand put on the Repo rate till the end of this fiscal year, as the endeavor to stabilize growth will be a long-drawn process, given the threat of evolving COVID strains.  In case, growth stabilizes later this year, the process of policy normalization will initially begin with a hike in reverse repo, rather than the repo rate.

Extension of On Tap TLTRO - On Tap TLTRO extended by 3 months to 31st December 2021.

Extension of MSF relaxation - Banks can avail the MSF relaxation for 3 more months till 31st December 2021.

Impact of TLTRO and MSF relaxation extension: RBI’s intention is to keep liquidity conditions benign that is, in general, supportive for banking business activity and would also prevent losses on the investment book due to any undue rise in interest rates.

Change from LIBOR to Alternative Reference Rate – (1) Banks will be allowed to extended export credit based on any other widely accepted Alternative Reference Rate. (2) Change from LIBOR to Alternative Reference Rate will not be treated as restructuring.

These steps ensure smooth transition for banks away from the LIBOR regime.

Resolution framework / Restructuring 1.0 - Recognizing the adverse impact of the second Covid wave, the target date for meeting the sector-specific thresholds for the 4 specified operational parameters stands extended to 1st October 2022 i.e. by 6 months.

It gives some more breathing space to banks in terms of successfully carrying out restructuring and reduces, ceteris paribus, chances of restructured wholesale accounts from slipping into NPA category."

Kumaresh Ramakrishnan, CIO-Fixed Income, PGIM India Mutual Fund
 
The MPC voted unanimously (6-0) to maintain key rates unchanged at the third bi monthly monetary policy. Through a 5-1 vote, the MPC also agreed to continue the “accommodative stance” for as long as necessary to revive and sustain growth on a durable basis. 
 
RBI upped its CPI target for the year to 5.7% from 5.1% earlier, acknowledging price pressures emanating both from exogenous supply side shocks such as a pick up in raw material prices (commodities – metals, crude) and higher logistics costs and shortages (chips). It was quick to add that it believed inflation spike to be transitory as the economy goes through an adjustment phase and hence preferred to largely see through these numbers.
 
RBI proposed some normalisation on liquidity to drain out part of the surplus liquidity which is topping INR 8 trillion. Variable rate reverse repos (VRRR) are proposed to be doubled from the present INR 2 trillion to INR 4 trillion over the next month while keeping the tenor unchanged at 14 days. RBI was quick to add that this should not be construed as tightening as VRR liquidity is part of overall system liquidity and was meant to moderate daily liquidity while compensating banks a little more through this route.
 
While we see the policy as “supportive” and the commentary as reasonably dovish, the less than unanimous vote for an accommodative stance, higher VRRR amounts and raising of inflation forecasts, signal some emerging concerns within the Central bank at the margins.
 
In this backdrop, we would continue focusing on the Banking & PSU, Corporate bond and Dynamic Bond fund categories, post today’s policy.

Jimeet Modi, Founder & CEO Samco Group

The RBI MPC has continued its accommodative stance and maintained status quo on repo rates for the seventh straight meet in line with market’s expectation. Inflationary tendencies have been affirmed and the MPC has upped its inflation forecast for FY22 to 5.7% labelling inflation driving price pressures as "exogenous and transitory." While additional measures have been announced to comfort the banks on liquidity availability the continuance of the same will foster an atmosphere of affordability, which has emerged as the new characteristic of the housing market. Conditions around aggregate demand still remain weak and any rate hike would have further deferred growth. Hence, the central bank’s policy remained more balanced than aggressive as it remains on heels to ensure adequate liquidity within the economy.

Sandeep Runwal, Managing Director, Runwal Group, President Elect, NAREDCO Maharashtra

"The RBI has declared the accommodative policy stance amid the fears of the expected third wave of the pandemic yet again. It is imperative that low mortgage rates would continue for at least some more time now or maybe until the end of the year. This will provide the required fuel for the growth of the economy along with the real estate industry with which several other allied sectors are linked. Apart from the low-interest rates, the consumers' realization of owning a home along with the stamp duty cut in the key markets were the growth drivers for the real estate sector in the past few quarters and the strong demand is expected to continue going ahead."

Vinay Kedia, Director, Prescon Group

"The RBI leaving the key rates unchanged was very much expected as the slow easing of localized lockdowns, slow pace of vaccinations and the looming threat of another wave continue to hinder economic revival. Although the low interest rates will provide a sustained growth for the real estate sector, the developer's focus on the completion of projects and overall economic recovery will be the key factors driving the real estate demand going forward. The homebuyers should take advantage of the current situation because there are chances that the prices might go upwards later on account of reducing supply and the pressure of increased costs of raw materials such as steel and cement.”

Himanshu Jain, VP - Sales, Marketing and CRM, Satellite Developers Pvt. Ltd.

‘’Repo rate cuts have been kept unchanged time and again by the RBI during the last few quarters to keep the economy of the country afloat amidst the pandemic. Maintaining an accommodative stance indicates the RBI will intervene to provide the right push and direction to growth whenever necessary. The current scenario offers excellent investment opportunities in the residential segment as affordability is at all-time high. We require support from the banks by providing adequate liquidity that will boost the real estate sector."

Siddhartha Sanyal, Chief Economist and Head – Research, Bandhan Bank

While the status quo on rates with a 6-0 voting and continued “accommodative” stance were on expected lines, the split voting as regards the policy stance was a modest surprise. Still, the overall tone of policy continued to focus clearly on supporting growth recovery. 

Given higher global commodity prices, sticky food inflation and rise in domestic fuel prices, inflation may stay higher than  for the RBI’s comfort. However, with the tentative and uneven nature of recovery, one expects the MPC to continue prioritizing supporting growth in the coming months.

Rohit Poddar, Managing Director, Poddar Housing and Development Ltd

“RBI’s decision to maintain the status quo keeping the repo rates unchanged at 4% indicates a continuation of its accommodative stance. Although, more efforts are needed to restore the supply-demand balance in the Real estate and infra sectors but continuation of lowest lending rates will ensure that businesses get more window to cope up with the pandemic related challenges. The decision comes at the peak of high inflation and slow growth with a concerning pandemic sitch around the globe. The yield curve and liquidity management were the central focus of the committee. However, we are evidently in a much better place compared to the past quarters. Nevertheless, we still need to be more cautious on the possibility of the third covid wave and its overall impact on the consumption.”

Ashok Mohanani,  President - NAREDCO Maharashtra

"The economic growth needs to be supported through monetary policy and this is the foremost reason that the RBI has continued its accommodative stance. It has focused on balancing liquidity in the financial system while keeping inflation within its target. The interest rates will continue to be at a record low for some time, however, the banks should pass on the benefits to the customers which will boost real estate demand. Although both the Central and the State governments are focusing on reviving the economy with various policy measures, a lot needs to be done to mitigate the adverse impact of the overall pandemic. We at NAREDCO have already urged the State Government to reconsider their decision and reinstate the stamp duty reduction till March 2022 so that home buyers continue to be encouraged and invest in their dream homes."

Cherag Ramakrishnan, Managing Director, CR Realty
 
"The RBI's approach to continue with a 'wait and watch' mode is on expected lines to enable the growth momentum that seems to have set in during the last 2 months. With the Covid uncertainty looming, this seems to be a prudent move to allow growth to firmly set it. This has allowed for all-time historic low home loan rates which have played a significant role in reviving the housing demand as compared to the pre-Covid era. The pent-up demand, the opening of economic activities, and continuous Government interventions have also helped in lifting the market sentiments. We feel that the demand for homes will now gain momentum going into the upcoming festive season”

Shraddha Kedia-Agarwal, Director, Transcon Developers

''RBI maintaining status quo on key policy rates was expected given the inflationary concerns in recent months. The low-interest rates for the last few months have already given a boost to the real estate sector upticking the demand in the last few quarters and enhancing the confidence of the homebuyers. The decision will help to sustain liquidity for some period as we are already witnessing the derailment of economic momentum due to the Covid-19 pandemic and lockdowns in different parts of the country. It will also help in sustaining economic stability as well as keep the real estate sector stay afloat during these unprecedented times.''
 
Sandeep Bagla CEO TRUST Mutual Fund.  

"RBI policy is hawkish at the margin. RBI has acknowledged the strong growth and negative surprise on inflation front. One of the MPC members has voted for change in accomodative stance. While there is no real change in the policy, bond market participants will take the nuanced change in language seriously. There is a distinct possibility that yields at the longer end, 10 year, will inch up towards 6.50% gradually. Investors should invest in bond funds with lesser than 3 year maturity to minimise interest rate risk." 

Ramani Sastri - Chairman & MD, Sterling Developers Pvt. Ltd.

"With economic recovery on a positive note following a second wave of Covid 19, growth needs to be carefully nurtured in the context of a relaxation in economic activities. This can be done by giving a fillip to the economy by incentivizing real estate. For this to happen, we expected a cut in rates which would have sent positive signals to economic and real estate players. Not only would the cuts have bolstered greater demand for homes as the interest regime would have been lower, there would have been greater infusion of capital in the market, enabling easier supply-demand transactions. The regular home buyer would ofcourse take advantage of low interest rates prevailing now, but the overall demand in the real estate sector at a holistic level would have gone up further, thus giving a fillip to the economy. Fortunately, real estate has been one of the most resilient industries even amidst the pandemic and has been showing signs of recovery. Demand stimulant measures like credit subsidy or tax waivers even for a limited period can play a transformative role until we reach the pre Covid-19 normalcy thresholds. While the government has been introducing several initiatives to help the sector, some strategic support in the form of giving input credit on GST and lowered GST on raw materials etc. will support sustainable long-term growth and benefit the developers as well as homebuyers."

Honeyy Katiyal, Founder of Investors Clinic

"The recovery in real-estate has been on a growth trajectory and with RBI keeping its stance the same and with no rate hike, it will improve the sentiment further. The festival season is the make and breaks for the residential real-estate and some rate cut no doubt would have sent a strong signal to the investors and buyers, but unchanged rates is also a welcome step for the developers. With the overall growth being lower across sectors and inflation at a higher end, lower rates will go a long way to help a sector that is the powerhouse for employment generation."

Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group

Keeping in mind the current scenario, a slight reduction in the key rates would have been widely celebrated as low interest rates have been a crucial factor in the revival of the demand in the real estate sector overall. We have already seen early signs of improvement in economic activity following the easing of some restrictions post the peaking of the second wave. To bolster this growth and revive the economy, a rate cut would have further improved the liquidity situation, which is vital for the real estate sector. While the consumer is enjoying low home loan rates currently, a cut would have further intensified demand. A continuation of low interest rates regime works well for borrowers. There is a need for stimulant policy measures that would enhance and ease credit provisions and increases buyer’s confidence. Any announcements in these forms would have been appreciated. As the nation recovers from the second wave of pandemic, there is a dire need to provide monetary policy support - on account of both easy availability and lower cost of funds - to households and businesses alike.  A rate cut have made a world of difference for the end consumer as well as the investor. We would also like to see measures to enhance demand in the real estate sector by lowering of stamp duty and registration charges in the near future. While the impact of Covid 19 has been high on specific segments, the luxury and second home sentiment has not been impacted as much. The perception of lifestyle has changed in response to the new reality which is driving demand for premium properties. The luxury housing segment has remained largely insulated from the slowdown because the market is driven by end users at the top of the pyramid who have not been deeply impacted unlike other housing categories, where they had to defer purchase decisions.

Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani

"The Consumer Price Index inflation rate of more than 6% for May-June was beyond the Reserve Bank of India’s (RBI’s) tolerance mark. The RBI’s accommodative monetary policy and unchanged low-interest rates could become a challenge for it if inflation spikes again. While the status quo maintained by the RBI is appreciated, the focus should be on boosting growth with the right fiscal measures and policy support. This is especially important at a time when the International Monetary Fund has cut India’s growth estimate from 12.5% in April to 9.5% in July.
As the second wave of the COVID-19 pandemic comes to an end and supply chains show signs of recovery, the real estate industry is inching towards normalcy. We are hopeful that the RBI and the Central Government will make announcements that trigger demand and boost the residential market segment. Just like the fiscal measures adopted last year, we are keen to see steps that enhance the market’s momentum and spur greater economic growth."

Y S Chakravarti, MD & CEO, Shriram City Union Finance

RBI has maintained an accommodative stance as expected and we believe this is likely to remain for the rest of the year. We believe 2022 is when economic environment is likely to improve. The extension of TLTRO till calendar end is a positive and will give access to credit to lower rated NBFCs. Higher rated NBFCs have ample liquidity. The positive outcome of this window is that it has opened up access to long term investors like Pension Funds and Insurance Companies and that will benefit all.

Niraj Kumar, CIO, Future Generali India Life Insurance

MPC has shifted its policy tone, reflecting the ever evolving dynamics of Inflation and growth, wherein the spectre of rising inflation and growth recovery is getting more pronounced. Today’s policy verdict can be perceived as a slight deviation from the hitherto ‘Dovish stance‘, as exemplified by MPC’s inflation forecasts being nudged higher. While the absorption of liquidity under VRRR window is set to increase in a calibrated manner pointing to unleashing of the gradual liquidity normalization process, however the reassurance to continue with its liquidity measures such as GSAP’s OMO’s OT’s etc would keep the bond market apprehensions at bay. Liquidity and credit push measures in terms of extension of MSF relaxation and extension of On Tap TLTRO will aid the credit growth in the system

Mohit Ralhan, Managing Partner & Chief Investment Officer, TIW Private Equity

RBI has maintained the accommodative stance indicating that the primary focus area remains growth and economic recovery is more critical than inflation. This was on expected lines as RBI has been demonstrating sustained commitment to growth. The September and December quarters are critical given the risk of third wave of COVID-19 and RBI has implemented proactive measures to maintain adequate liquidity in the system. The markets are in strong bull phase indicating significant confidence on India’s growth prospects and RBI’s policy stance extends a strong support to it.

Rajee R, Chief Ratings Officer, Brickwork Ratings

RBI’s announcements, while largely on expected lines,  also pointed to a slightly less dovish tone. The growth supportive policy reiterated RBI’s “whatever it takes” mode  to ensure preservation of financial stability and sustainable growth to mitigate the impact of COVID on the economy, especially since the underlying conditions around aggregate demand are still weak. The increase in quantum of VRRR indicates the start of policy normalization on the liquidity front. However, while noting that pre-emptive monetary policy response at this stage will kill the nascent recovery, RBI has extended the On-tap TLTRO and MSF relaxation by another three months. Announcement of conducting two more GSAP auctions in August help in anchoring yield expectations and easing the government borrowing programme.  Extension of the timeline by six months to achieve the threshold for certain operational parameters under the RBI Resolution Framework for COVID related stress is a relief. Revision of the inflation forecast to 5.70% reflects the higher inflation scenario.

L Viswanathan, Partner, Cyril Amarchand Mangaldas

“The MPC’s decisions to keep rates unchanged and maintain an accommodative stance as well as the Governor’s statements on inflation, growth and using all levers for recovery are reassuring. The Statement of Development and Regulatory policies similarly extending the TLTRO deadline, the date for complying with financial parameters for the one-time Resolution Framework for COVOD 19 stress are also timely and important. The Governor also stated that the report on regulating digital lending apps will be out later this month, which will provide must needed regulatory clarity to foster financial inclusion in a more regulated manner.”

Ram Raheja, Direct, S Raheja Realty

‘’The decision to maintain the repo rate at 4% and reverse repo rate at 3.35% by the RBI is in line with expectations. RBI with its continued accommodative stance to maintain liquidity surplus in the market can be viewed as being pragmatic. This status quo will further allow demand creation including for high involvement products like real estate. The real estate sector is expected to continue benefiting from the pass-through of low benchmark lending rates to end consumers, especially in the residential segment. Homebuyers will continue to take advantage of the lowest ever home loan interest rates and with the emerging need, the demand for housing is going to sustain as it is a safe-haven asset. With improved GDP growth estimated in the near future, we expect that the real estate sector will contribute a substantial share to overall economic development’’

Shiv Parekh, Founder of hBits

The RBI has kept the rates unchanged, this is an overall positive economic indicator for every industry. Real-estate activity is highly dependent on the lower rates and keeping its stance same shows Government and RBI’s commitment towards economic growth and employment generation, which is the need of the hour. Real-estate is the second largest employment generating sector. Despite a high inflation RBI should consider lowering rates in the coming quarters, RBI needs to choose between temporary high inflation rate and the economic growth of the country.

Honeyy Katiyal, Founder of Investors Clinic 

The recovery in real-estate has been on growth trajectory and with RBI keeping its stance same and with no rate hike, it will improve the sentiment further. The festival season is the make and break for the residential real-estate and some rate cut no doubt would have sent a strong signal to the investors and buyers, but unchanged rates is also a welcome step for the developers. With the overall growth being lower across sector and inflation at a higher end, lower rates will go a long way to help a sector which is the powerhouse for employment generation..