New Delhi: The Reserve Bank of India (RBI) is likely to maintain the status quo in its Monetary Policy Committee (MPC) meeting, said industry experts on Monday, as the much-anticipated three-day meeting began, led by Governor Shaktikanta Das, amid geo-political uncertainties.
The six-member committee began deliberations on interest rates and analysing the state of the economy amid tensions in the Middle East. The RBI Governor will announce the MPC decision on October 9.
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said that growing geopolitical concerns, particularly in the Middle East, add to inflationary concerns that can emerge from its impact on crude prices.
“Despite elevated interest rates, India’s economic growth has remained resilient, with consumption indicators such as home sales maintaining robust momentum. This sustained growth provides adequate cushioning for the RBI to keep the repo rate at the existing level of 6.5 per cent,” Baijal added.
Additionally, the imbalance between credit and deposit growth, where credit growth has outpaced deposit growth, may prompt the RBI to keep policy rates tightened, keeping it unchanged for an extended period, said experts.
For the real estate market, a cut in the repo rate would result in lower interest rates on home loans, which makes EMIs more manageable for borrowers.
According to Anuj Puri, Chairman, Anarock Group, the housing market is especially sensitive to changes in acquisition cost since in India, most home buyers use home loans.
“Of course, interest rates are not the sole factor to influence purchase decisions as property rates also play a big role. More attractive interest rates can help improve overall affordability, and this can help catalyse housing sales during the festive season. Improved sales also benefit developers as better sales improve their cash flows and reduce their borrowing expenses for projects,” said Puri.
While the recent US Fed cut would have prompted the RBI to follow suit, the fact is that the global economy is facing considerable uncertainty because of the ongoing geopolitical tensions.
Experts said that it is a tightrope walk for the RBI and it is, therefore, possible that it will hold on to the current repo rate for now, until these pressures ease.
