Bankers, financial players hail RBI repo rate cut, hope consumer demand to get a boost

Banking and finance experts hailed the RBI's decision to cut the short-term lending rate, terming it as a step in right direction that could help stimulate consumer demand.

The Reserve Bank in its second bi-monthly policy statement for 2019-20 announced to cut the key repo rate, at which it lends to banks, for a third straight time by 25 basis points to 5.75 per cent.

"The policy was very positive and was reinforced by unanimous voting and the change in stance to accommodative. The statement's focus on supporting growth and bolstering private investment as long as inflation remains within the mandate, is also encouraging and leads us to believe that more accommodation is on the cards," said B Prasanna, Group Head Global Markets Sales, Trading and Research, ICICI Bank.

Vasu Ramaswami, COO, Muthoot Fincorp said the latest rate drop should help in improving consumption demand, particularly for the common man, especially once banks decide to pass this rate change to their customers.

On the NBFC crisis, Governor Shaktikanta Das said that the RBI is closely monitoring the situation and there is ample liquidity in the market currently.

"The unanimous decision by the Monetary Policy Committee (MPC) to cut the repo rate by another 25 bps is a step in the right direction," said Khushru Jijina, MD, Piramal Capital and Housing Finance.

The downward revision of growth projection to 7 per cent calls for implementation of additional rapid policy interventions by RBI as well as the government.

NBFCs are instrumental in providing credit to MSMEs and real estate sectors and more decisive and pro-active policy measures are required to address the current liquidity crisis, Jijina said