For the second time in a row, corporates expecting an easing of interest rates were left disappointed as the Reserve Bank of India on Tuesday left key lending rates and cash reserve ratio, or portion of deposits banks need to keep with the RBI, unchanged.
However, to increase liquidity, the RBI lowered the statutory liquidity ratio (SLR), or the amount of deposits banks have to park in government bonds, by one percentage point to 23%.
?It is disappointing that the RBI chose not to cut policy rates,? said Harsh Pati Singhania, president of Indian Chamber of Commerce and director of JK Organisation. ?Reduction in the SLR does not make any difference in the present scenario as credit growth has not picked up due to higher rates of interest.?
?By following this path, the RBI is not taking any constructive steps to either control inflation or stimulate economic growth,? he added. ?Maybe it is time we started looking at the paradigm of living with a slightly higher inflation accompanied with higher growth.?
The Federation of Indian Chambers of Commerce and Industry (FICCI) urged the RBI to coordinate with the government. ?The RBI and the government need to coordinate and find a solution to balance the monetary policy, improve the fiscal situation and get growth back into the economy,? said RV Kanoria, president, FICCI.
?The benefits of higher growth are certainly not confined to India Inc alone,? he added. ?High and consistent growth is necessary to meet the aspirations and expectations of our large young population.?
Real estate companies have been one of the worst hit as high interest rates stifled property purchase decisions. The sector was once again unsatisfied by the monetary policy.
?There is once again disappointment from the RBI,? said Lalit Kumar Jalan, CMD of Kumar Urban Development and president of CREDAI, an all India association of real estate developers. ?Both the developer community and home buyers are unhappy with the policy and this will affect the already disheartened sector.?
Tata Housing?s Brotin Banerjee said the real estate sector will revive once the general economic conditions improve. ?Although investor sentiment is depressed at this time, demand from consumers looking to purchase their first residence remains steady,? he said. ?Such consumers are aware that policy rates will average out over a 15-20 year period and are willing to invest if they find the project compelling.?
Real estate consultancy firm, Cushman & Wakefield expected interest rates to remain unchanged. ?As expected, the RBI has maintained CRR from the previous announcements thus interest rates on residential property loans will continue at the current level,? said Sanjay Dutt, executive managing director (south Asia), Cushman & Wakefield. ?For the housing sector this may not be a very positive news.?
?The outlook for the sector remains cautious as persistently high inflation rates are keeping construction costs up which are not expected to come down in the near future,? he added.
?The realty sector needed a rate cut to boost investor sentiment,? said Anshuman Magazine, CMD of CBRE South Asia, a real estate developer.
Credit rating agency CRISIL, however, said the central bank?s decision was the right decision. ?RBI?s decision to keep policy rates unchanged despite lower growth was the right thing to do given the risks to inflation and limited upside to growth even if interest rates were lowered,? it said in a statement. ?Lower interest rates cannot in isolation propel growth unless fiscal policy turns supportive.?