RBI Monetary Policy August 2022: Industry Outlook


The Monetary Policy Committee (MPC) announced an increase in Repo rate by 50 basis points. NewsBarons connects with industry leaders to share their views and opinions on the MPC announcement.

RBI action is in line with expectations: Amit Goenka

Amit Goenka, MD & CEO, Nisus FinanceThe RBI action is in line with expectations and its effect can be seen in a stabilising rupee, and increased FII inflows into the stock market, which will greatly help the long run health of the economy and positively impact demand for housing. In the short run, there is likely to be an impact on PMAY and rural areas are likely to see slightly slower growth.

[Amit Goenka, MD and CEO at Nisus Finance]

RBI and MPC have taken bold steps to overcome the global headwinds: Rajiv Agarwal

www.newsbarons.comRBI’s decision to raise the repo rate by 50 bps to 5.40 percent clearly signals the intent to keep the country within the targeted inflation rate. Hence the GDP growth forecast was also retained at 7.2% which is still one of the best globally. The country’s economy is heading in the right direction with urban demand increasing and domestic economic activity showing signs of broadening even though rural demand shows a mix trend. The RBI and MPC have taken bold steps to overcome the global headwinds that are driving inflation and keep the Indian economy on the path of growth.

[Rajiv Agarwal, Operating Partner (Infrastructure), Essar and Managing Director, Essar Ports]

MPC announcements were largely on expected lines: Rajni Thakur

www.newsbarons.comThe markets had broadly priced in 50 bps hikes in Repo rates and any forward guidance would have mattered more than the rate action itself. The policy statement however, stayed away from any explicit forward guidance while remaining consistent on its assessment of growth and inflation trajectory for the economy. Any mention of nature and quantum of intervention, to manage currency faced with huge capital outflows didn’t find a place as well. Nevertheless, given the growth-inflation outlook, further hikes towards 6% terminal repo rate seem imminent, even though the pace of hike will likely be softer going ahead. Continued ‘focus on withdrawal’ indicates further drawdown of excess liquidity as well, in which case, monetary tightening is far from over yet.

[Rajni Thakur, Chief Economist, RBL Bank]

Also Read:


The rate hike has been announced to control the runaway inflation: Aditya Kushwaha

www.newsbarons.comAligned to the increase in rates by US FED, the Reserve Bank of India, too, has announced a repo rate hike by 50 bps. This rate hike has been announced to control the runaway inflation. But this hike in rate has not taken into account things such as growth forecasts, with a more significant impetus expected from the domestic economy. The home loan borrowing is at a flexible rate, and a short-term interest rate spike will certainly hurt homebuyers’ sentiments and dampen the spirits of potential home buyers who were looking at the auspicious festive season as an occasion to buy. However, developers will have to be conscious of the inflationary pressure and chalk out deal sweeteners on the back of festive tailwinds

[Aditya Kushwaha, CEO and Director, Axis Ecorp]

Setting up the committee to develop alternative benchmark rates is in line with the global trends: Soumitra Majumdar

Aligned to the US FED rate raise, the RBI also increases the Repo rate. With several demons to slay, the RBI seems to have chosen taming inflation as its primary goal. Growth forecasts have not been moderated based on strong fundamentals – with larger impetus expected from domestic economic activities. Coupled with this is the policy thrust of insulating India against imported inflation. It is therefore critical for the domestic stakeholders to rise to the occasion, of delivering the growth promises. Quicker resolution of stressed loans may also give that extra push of ensuring domestic credit expansion. Concomitant policy push in these directions are also necessary. RBI’s efforts in further strengthening the financial institutions players and products is a welcome move. Setting up the committee to develop alternative benchmark rates is in line with the global trends and should help in appropriate market- linked price discovery for credit.

[Soumitra Majumdar, Partner, JSA (Law Firm)]

Further hike in interest component of home loans for end-users: Anurag Mathur

www.newsbarons.comAs consumer price inflation remains stubbornly out of RBI’s tolerance range, the Monetary Policy Committee has increased the benchmark lending rates, for the third consecutive time, by 50 bps. With this, a cumulative increase of 140 bps has now taken place, which is quite steep. All the same, viewed in a larger context, the increase is in sync with similar and even more severe rate actions across major economies, such as the US and the UK. The RBI continues to maintain the GDP growth rate projection at 7.2% for FY 23.

Financial institutions are expected to react in tandem with the RBI announcement, which in-turn means further hike in interest component of home loans for end-users. Given that the stamp duty and registration charge relaxations have expired in most states, the overall impact of the RBI decision on housing sales in the country needs to be closely monitored. Residential developers with debt on their balance sheets are also likely to be equally affected and must pay significant attention to working capital management.

[Anurag Mathur, CEO, Savills India]

The tone of the policy continues to be aggressive: Sanjay Palve

www.newsbarons.comThe MPC’s actions are in line with the current global inflation scenario and has leaned in favour of anchoring inflationary expectations to work out solutions to decipher the growth potential of the economy. The tone of the policy continues to be aggressive. The hike in repo rate by 50 basis points to 5.4% to pre-pandemic levels does not come as a surprise. RBI’s actions and efforts are to largely surmount the global headwinds that are driving inflation and to ensure inflation remains within target going forward.

[Sanjay Palve, Senior Managing Director, Essar Capital Ltd.]

Lending and deposit rates are likely to firm up: Pankaj Pal

The RBI decision is on the expected lines considering the current inflationary scenario. The lending and deposit rates are likely to firm up. It may have a slight impact, but we don’t foresee a major impact on the demand side in the housing market. It is likely to remain robust as real estate is largely viewed by buyers as the best investment option considering the volatility in the equity market, gold as well as other investment avenues.

[Pankaj Pal, Group Executive Director, AIPL]

Demand for all kinds of properties continues to remain high: Saransh Trehan

RBI has already raised interest rates a couple of times this year, and it had very little or rather no impact on the demand for real estate as the Indian economy is one of the best performing economies globally and the consumer sentiment is on a high. As a result, the demand for all kinds of properties continues to remain high and the scenario is unlikely to change in the near future.

[Saransh Trehan, Managing Director, Trehan Group]

We are seeing the highest rates that existed pre-pandemic during 2019: V Swaminathan

With this repo rate hike of 50 bps, we are seeing the highest rates that existed pre-pandemic during 2019. This lending rate calibration by the RBI could signal a downward trend in borrowers looking for home loans, as both new & existing home loan emis are set to go up, ushering in a wait-and-watch attitude among new homebuyers.

[V Swaminathan, Executive Chairman, Andromeda loans and Apnapaisa]