Companies across sectors such as real estate, automotive and consumer durables have welcomed the Reserve Bank of India’s temporary pause to rate hikes on Thursday.
The central bank said it was holding its key repo rate for now, which stands at 6.5%, providing much-needed relief to consumers and firms.
Speaking to Financial Express, Kamal Nandi, business head and executive vice president, Godrej & Boyce Manufacturing Company, which makes consumer durables under Godrej Appliances, said the pause would help reduce the pressure on consumers due to persistent rate hikes.
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“From May last year to now, the key repo rate has increased by 250 basis points. That is a sharp increase in a year. So, the move by the RBI to hold its key policy rate is welcome and will help reduce the financial burden on consumers, at least for now,” he said.
The repo rate helps determine the lending rates of banks, which has an impact on loan portfolios ranging from home loans to auto and durable loans. In the run-up to the Monetary Policy announcement on Thursday, analysts expected a 25 basis points hike in the repo rate. One basis point is one-hundredth of a percentage point.
Sanjiv Bajaj, president of the Confederation of Indian Industry (CII), an apex body, said the repo rate hike pause would help bolster business sentiment by containing the rise in borrowing costs for both companies and consumers.
“We agree with the central bank’s observation that the lagged impact of the past rate hikes should be allowed to percolate into the system, and not stifle demand,” said Bajaj, who is also chairman, MD & CEO of Bajaj Finserv.
Conglomerates such as the Mahindra group, which manufactures automobiles and tractors, said growth and inflation estimates by the RBI were reasonable, requiring no rate hikes for now.
“Discretion is the better part of valour,” said Sachchidanand Shukla, chief economist at the Mahindra group. “The growth and inflation estimates do not warrant a knee-jerk reaction. The RBI’s stand on liquidity is also extremely practical,” he said.
Niranjan Hiranandani, founder & managing director of real estate group Hiranandani, who is also the vice-chairman of the National Real Estate Development Council (NAREDCO), said the RBI’s rate hike pause would help restore homebuyers’ confidence and fuel property sales in the domestic market.
“The unchanged repo rate at 6.5% will encourage capital expenditures to move from a cautious to an optimistic scale. Also, as India’s consumption-driven economy is interest-rate sensitive, this softening measure of monetary tightening will further boost demand,” Hiranandani said.
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Sanjay Palve, senior MD of Essar Capital, said by holding the repo rate, the RBI has maintained price stability while supporting economic growth.
“The Monetary Policy Committee’s decision to keep the repo rate unchanged is welcome. Despite the volatility and global uncertainty, the banking and non-banking financial service sector in India has displayed resilience,”Palve said.