Shaktikanta Das led RBI MPC cuts repo rates by 25 bps; experts react, this is what they said

The Governor Shaktikanta Das led Reserve Bank of India (RBI) cut its policy interest rate by 25 basis points in a widely expected move on Thursday, while also changing its monetary policy stance to "accommodative" after the economy grew at its slowest pace in over four years in the January-March quarter. The six-member monetary policy committee (MPC) cut the repo rate to 5.75% as predicted by 44 of 66 analysts polled by Reuters last week. The reverse repo rate was reduced to 5.50%.

Vasu Ramaswami, COO, Muthoot Fincorp Limited
“The latest rate drop should help in improving consumption demand, particularly for the common man, especially once banks decide to pass this rate change to their customers. For the NBFC sector, which has been under some level of tightened liquidity conditions, this should also help in accessing more funds at a cheaper rate, which would eventually help in providing timely credit to millions of their small customers.”

Dr Joseph Thomas, Head Research- Emkay Wealth Management
“The repo rate cut of 0.25% and the change of stance from neutral to accommodative is key to supporting the sagging economic growth. The projected growth has been lowered to 7%. The policy also has broad indications of more action on the liquidity front from the RBI in the coming days. This also confirms the commitment of the central bank to better transmission of the rate cut effects through liquidity”.

Parth Mehta, Managing Director, Paradigm Realty
The rate cut of 25bps was imperative. Since the CPI was well under 2.5% and recent crude prices dip, a higher rate cut would have been more cheerful for the markets. The stance change from neutral to accommodative by RBI indicates the cognizance about the current fragile business environment and we expect further rate cuts in times to come. Rate cuts shall enable affordability in terms of home loans and thus lowered EMI, lower GST, tax rebate for income up to Rs6.5 lakhs (including section 80C)  for the middle class as per as interim budget. All these shall give some sales impetus to real estate.

Shishir Baijal, Chairman & Managing Director, Knight Frank India
“The first rate cut in the newly elected government’s regime is certainly a welcome step, especially for the real estate sector.  The benefit of lower policy rate in terms of better credit cost as well as higher liquidity will hopefully be transmitted further by banks to NBFCs as well as home buyers. Also, the change in policy stance from neutral to accommodative is a welcome shift as it lays ground for further rate cuts. The cash-crunched NBFCs will definitely benefit from inflow of capital which will in turn benefit developers as well as home-buyers. NBFCs have been facing a liquidity crisis and this has negatively impacted their loans to real estate, including construction finance. Besides capital infusion into this important financier segment, this rate cut will also improve the home-buyers affordability and stimulate housing demand at this critical juncture.”

Devendra Pant, Chief Economist, India Ratings, New Delhi
"The 25-bp cut with `accommodative` stance with 6-0 vote shows that with inflation below the RBI`s target of 4%, growth concerns have come to the forefront. By changing its stance, the RBI has communicated to the market that the growth slowdown is real." "A working group on liquidity is a welcome step. With system liquidity in surplus mode in the past few days, lending rates should come down." 
"The forthcoming budget is the real test for the government. The government has to find money for social spending and undertake some hard reforms to improve tax collection and adhere to the fiscal consolidation trajectory."

Joseph Thomas, Head Research, Emkay Wealth Management, Mumbai
"The RBI policy is exactly on the lines expected by most of the market participants. The repo rate cut of 0.25% and the change of stance from `neutral` to `accommodative` is key to supporting the sagging economic growth."
"The projected growth has been lowered to 7%. The policy also has broad indications of more actions on the liquidity front from the RBI in the coming days. This also confirms the commitment of the central bank to better transmission of the rate-cut effects through liquidity."

Rupa Rege Nitsure, Chief Economist, L&T Financial Holdings, Mumbai 
"Today`s policy actions are perfect and give a clear signal that the RBI will continue with easy monetary conditions until it sees a definite improvement in growth-inflation mix." "Going by the macro undercurrents, the rate-cutting cycle will continue in the coming quarters as well." "Recent GDP numbers were consistent with the slowdown predicted by high frequency leading indicators and the RBI has taken a serious note of it."

"The government too will address growth concerns in its upcoming full Budget in July and there are pleasant signs that both the government and the RBI will work in tandem to pull the economy out of the trap."
"Transmission will happen meaningfully if the banking system witnesses surplus liquidity conditions for a sizeable period and if the RBI undertakes confidence boosting measures for the NBFC sector."