RBI hikes repo rate 50 bps to 4.9 percent, Industry reacts

RBI has hiked the repo rate by 50 base points to 4.9 percent to ensure that inflation remains within the target

RBI governor Shaktikanta Das has just announced that the Reserve Bank of India has hiked the repo rate by 50 base points to 4.9 percent to ensure that inflation remains within the target. Das stated that the member of the Monetary Policy Committee (MPC) voted unanimously to hike rates and decided to remain focused on a withdrawal of accommodation to ensure that inflation stays in control. 

Industry views have now started trickling in on RBI hiking repo rates. "The RBI hike in repo rate was impending due to the inflation spike and global macroeconomic scenarios. The overall increase of ~ 1% in the cost of funds by the RBI over the last few months will impact the overall feasibility of large projects, infrastructure and long gestation projects. MSMEs, on the other hand, are recovering due to improved customer sentiment after nearly 2 years of uncertainty. MSMEs need more adequacy and certainty of funds versus costs alone and thus we believe they should be able to handle this increase, as long as this stays in this range for the medium term,” said Manish Lunia, co-founder, Flexiloans.com.

“The increase in NACH mandate limits per transaction to Rs 15,000 from Rs 5000 will expand quick access to credit to the customers. The silver lining is the calibration that RBI continues to hint for its monetary policy action in future - evenly balanced towards growth and fiscal stability measures,” added Lunia. Along Similar lines, Amit Goyal, CEO, India Sotheby's International Realty stated that this decision by RBI was along expected lines.

“RBI decision to hike the policy rates is on the expected lines. With inflation lingering obstinately high, RBI had little choice. We hope the hike in repo rate would rein in rising commodity prices and ensure sustainable growth in the long term. At the same time, we don't see any major impact of the demand side in the housing market, which continues to remain strong. We are hopeful with the supply side measures taken by the government,   inflation will cool down by the year-end, and the central bank will revert to a lower interest rate regime,” said Goyal.

Ramesh Nair, CEO, India and MD, Market Development, Asia, Colliers, on a positive note, added that the Indian economy was strongly placed and on the path to recovery. “On expected lines, RBI hiked repo rate by a further 50 bps to 4.9% while continuing to move away from its accommodative stance. The hovering inflationary concerns amidst the resilient domestic economy supports this RBI’s aggressive move. Despite the challenging global environment, Indian economy is strongly placed and on the path to recovery and GDP growth is pegged at 7.2% for FY 2022-23. On a cumulative basis, this translates into an almost percentage point increase in repo rate in the last 1 month. However, it remains lower than the pre-pandemic level of 5.15%. We expect banks to gradually pass on this rise in the form of higher home loan rates in the coming months. An opportune time for homebuyers to take advantage of the prevailing home loan rates at a time when prices are also expected to rise in most of the markets led by revival in demand,” he said.