Mumbai: The Reserve Bank of India (RBI) cut key lending rates by another 25 basis points to 5.75 per cent on Thursday.
In the second bi-monthly monetary policy of 2019-20 under Governor Shaktikanta Das, the six-member Monetary Policy Committee voted 4:2 in favour of the rate cut.
The Monetary Policy Committee (MPC) also decided to change the neutral monetary policy stance to accommodative.
Benchmark interest rate was cut by 0.25 per cent to 5.75 per cent from 6.00 per cent, a move that would result in lower cost of borrowing for the banks that are expected to pass on the benefits to individuals and corporates.
Please find below inputs on the new RBI Monetary policy.
“With the waiver of charges on payment modes like RTGS and NEFT, RBI is clearly nudging the banks towards increasing digital payments. This move will specially benefit the small traders who deal in small value transactions and operates on small margins and for whom every penny counts. So this is actually a great move for the masses and will go a long way in encouraging digitization of payments and enhancing financial inclusion. Moreover RTGS and NEFT are much cheaper modes than other payment mechanisms like Cheques in terms of the cost involved in managing end to end transactions until settlement. This move will therefore benefit banks and the entire ecosystem by encouraging more volumes,” said Mandar Agashe, Founder and Vice President, Sarvatra Technologies.
Raman Kumar--- Chairman and Founder of CASHe said “The interest rates are amongst the highest in the emerging economies. The reduction in repo rate by 25 bps will directly bring down the rate of EMI which means consumers can now avail home, auto and other loans at much cheaper rates. This will encourage lending and credit thereby boosting the overall economic growth. This is the third straight interest-rate cut which will largely ease liquidity and nurture the investment cycle. This will also revitalize consumption, enhance demand and exports besides resolving the ongoing liquidity issues in the financial sector.
Besides, the waiver on RTGS and NEFT charges will further promote digital transactions. We are looking forward to a strong growth momentum in the coming fiscal which will be backed by robust investments by the government.”
Gaurav Chopra, Founder & CEO, IndiaLends says “RBI’s decision to reduce repo rate by 25 basis points to 5.75 per cent, augurs well with the retail lending sector. Amidst global uncertainty, subdued domestic industrial activity & CPI within RBI’s comfort zone of 4% within a band of + or – 2 per cent, this anticipated reduction is a welcome move.
This rate cut will cause a rise in the overall investment demand and improve credit environment of the economy. The reduction will give an extra room for the retail loans to become cheaper as this will cause the current cost for lenders to go down along with a possible chance of tenure reduction for old customers. If the eventual lending rates get lower, we can expect a slight motivation from end consumers to borrow more. Additionally, the decision to eliminate charges on fund transfers through RTGS and NEFT routes will provide the necessary impetus to digital fund movements.”
Views on On-tap licensing of small finance banks
“RBI's decision to accept small finance bank applications on-tap is a much anticipated and welcome move as the current SFBs have been doing a commendable job on achieving the goal of financial inclusion. As a financial inclusion platform for the blue collared workforce in the country, NiYO wholeheartedly welcomes the move. RBI should also look at a new category of license for new age digital banks or ‘Neo-Banks’, which operate as a differentiated banking platform solving a particular part of the financial inclusion problem in a robust and efficient manner,” Said Vinay Bagri, Co-founder & CEO, NiYO.
Views on Foreign Exchange Trading Platform for Retail Participants
"Opening an electronic forex trading platform for retail participants with a fair and transparent price discovery mechanism is going to be a huge relief for the retail forex payments market, where traditionally customers had to pay hefty fees and charges. This decision is in line with NiYO's belief in democratizing the foreign exchange payments mechanism for over 25 million Indians travelling abroad every year, with an easy, convenient and secure way to pay outside India, with no forex mark-up."
Vijay Mansukhani, MD, Mirc Electronics Ltd (Onida), said “We welcome this move of 25 bps rate cut. Rate cut of 50 bps would have been better considering the current liquidity and low consumer sentiment in the market. Moving from neutral to accommodative status is encouraging step from RBI. We hope the economy will grow at better rates in Q2 FY20.
The low consumer demand in Q4 FY19 coupled with low GDP has had a negative impact on the companies earnings, we are hoping for better times during the Q2 FY19 onwards.
Vinod Ramnani, Director, Opto Circuits India Ltd, said “RBI rate cut is on the expected lines. With its 'accommodative' stance, we expect the RBI to remain supportive, maintaining liquidity at a slight surplus over the next few months. This liquidity will boost private spending across Industries. Private spending by corporates coupled with Government spending and consumption will drive the economy.
Amid slowing economic growth and rising global uncertainty, this is a welcome move in our business”
“RBI rate cut comes at a time when India’s Q4FY19 GDP growth rate reduced to 5.8 per cent, a five year low under the Modi government. Even though inflation has remained very much under control, the liquidity had been in deficit mode for the past few months.
With its 'accommodative' stance, the RBI has signaled higher chances of more cuts in the coming months if inflation persisted within tolerable limits. This is a positive move for us as this will bolster liquidity and boost private spending across Industries.
The Government has obliquely hinted that at even lower interest rates, the focus appears to have shifted more towards engineering a quick turnaround in the broader economy by boosting consumption and investment, which is the need of the hour,” Says MadhuSudhan Bhageria, Chairman and Managing Director, Filatex India Ltd.
Sunu Mathew, Managing Director, LEAP India Pvt Ltd., says “The RBI’s move to cut the rate should instil consumer confidence, which would in turn spur the growth in Beverages, FMCG, Retail and automobile industry. This also signals that lower interest rate regime as commodities rates are subdued across the world. This is positive news for corporates to tap the expected demand in Q2 FY20. With stable Government at centre, normal monsoon coupled with low interest rate regime and RBI’s initiatives to increase the liquidity, we hope that RBI’s target growth rate of 7 per cent in Q2 FY 20 would come true.”
