Private insurers welcome RBI's move to ease interest rates

This rate cut complements fiscal policy steps already being taken by the govt to boost growth, says Future Generali

Welcoming a 25 basis points rate cut by the Reserve Bank, private insurers said that it is an important turn in the interest rate cycle, which will boost both equity as well as debt market, and it is in line with the government policy to boost growth.

"Today's monetary policy measure by the Reserve Bank to cut the repo rate by 25 basis points marks a turning point in the interest rate cycle and complements fiscal policy steps already being taken by the government to boost growth," Future Generali India Life Insurance Chief Investment Officer Nirakar Pradhan said.

Going forward bank lending rates are expected to come down and the lower cost of borrowing would enhance corporate earnings, he said.

Bharti AXA Life Insurance Chief Investment Officer Sandeep Nanda said, "The rate cut by RBI, signals the beginning of the interest rate reversal cycle and is a positive move for the equities markets."

The timing of the rate cut came as a surprise and bonds reacted positively with yields falling by 10 to 12 bps, he added.

Kotak Mahindra Old Mutual Life Insurance Fund Manager, Debt, Kunal Shah said, "RBI has re-iterated that once the stance changes subsequent move will be consistent to the direction. Hence, we believe RBI will ease further by 25bp by March 2015.

"RBI also has data on inflation expectations survey, which confirms the drop to single digit future inflation expectations."

If global commodity prices remain soft and fiscal consolidation continues, RBI might cut rates by another 50-75bp from current level in calendar year 2015, he added.

Nanda said that going forward, further rate cuts depending on the quality of fiscal consolidation will help in the revival of growth in cyclical sectors and see bond yields falling further.