In a much anticipated and steadied move, the RBI kept rates unchanged today in its first bi-monthly policy review for this calendar year. The key rate (Repo Rate) remains at 6.75 percent, Reverse Repo Rate at 5.75 percent, Cash Reserve Ratio (CRR) at 4 percent and the Marginal Standing Facility (MSF) rate and the Bank Rate at 7.75 per cent. Last year saw the apex bank reduce the key rate by 125 basis points or 1.25 percent allowing a significant room for the banks to reduce lending rates for the buyers.
“The Union Budget 2016 – 17 being around the corner, it was extremely crucial on RBI’s behalf to come out with a no-change review keeping in mind its anxieties on the inflation rate in future. Accordingly, RBI might have to follow a suitable budgetary tightening approach to reduce its impact on the economy”, states Mr. Deepak Kapoor, President CREDAI-Western U.P. & Director, GulshanHomz.
“With such heavy reduction in repo rates in the last calendar year, the banks are still to pass on these, thereby giving the RBI reasons to hold back. As the CPI inflation was static post the previous policy review, there were no immediate panic buttons pushed which would have resulted in changed rates from the apex bank”, explains Mr. Rupesh Gupta, Director, JM Housing.
Mr. Vikas Bhasin, MD, Saya Group avers, “The biggest boost was to keep the Bank Rates unchanged. With the financial year closing and banks looking to ascertain steady fund flow in the opening quarter of the next financial year, it was necessary to give them a firm ground to play upon. This might also help in allowing banks a free hand at disbursing loans with reduced risks in the market.”
“With the Federal Reserve rates being unchanged on the past two occasions and FDI holding a steady inflow in the market, hiking the rates now would have adversely affected the economy. Crude oil prices have constantly fallen down or atleast maintained a stabilized rate in the foreign market which is a good catalyst in itself for revival of the nation’s economy”, adds Mr. Rahul Chamola, MD, One Leaf Group.
“With the upcoming budget expected to be all inclusive rather than exclusive, it was necessary for the apex bank to hold on to the current rates. This gives both, the government and the RBI some relaxations in their work. The government will not be under any undue pressure with changed rates before the budget and the RBI can study the annual budget and accordingly come about with changes in the next bi – monthly policy review”, affirms Mr. Sudeep Agrawal, MD, Shri Group.
“For 2016-17, growth is expected to strengthen gradually, notwithstanding significant headwinds so this is a much balanced and expected review decision. Although, the benefit of repo rate reduction in terms of reduced lending rates was not passed in equal amounts to the loan seekers but the sector remains hopeful that the Union Budget for 2016 – 17 will provide additional comfort to financial institutions helping them cut down further on their lending rates”, concludes Mr. Rakesh Yadav, Chairman, Antriksh India.
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