The Reserve Bank of India (RBI) decided to reduce the Repo Rate by 25 bps in its second Monetary Policy Committee (MPC) on June 6. The unanimous decision of the rate cut was carried out after analysing the slowing economy of the country.
There were varying pre-estimations by economists, bankers, corporate owners and traders on their expectations from the monetary policy committee. Now, let's understand from some reactions, what they take from the decisions of the RBI in the end.
DK Joshi, Chief Economist, CRISIL, stated that he feels positive about the stance change from 'neutral' to 'accommodative' as it might help in the assurance of liquidity which in turn might make the transmissions better. According to him, there might be another rate cut to take the accommodative stance forward.
According to a statement given to Bloomberg Quint, Pankaj Murarka, CIO of Renaissance Investment Managers, said that the central bank has done its part and it is over to the central government to decide concrete policy measures and actions to revive growth in the budget.
Mihir Vora, CIO of Max Life Insurance, claimed that he was happy that the slowing down of the growth in the country was at last taken into the limelight and appropriate actions were taken. He added that he would want to see strategic moves to stimulate growth prospects in the economy.
"Liquidity level has been rising for 15 days. Interest rate trajectory is headed lower since global growth is slowing and inflation is staying low," said Keki Mistry, Vice Chairman & CEO of HDFC. He even added that the boost is liquidity has negated the hopes of a CRR cut.
The CFO of Federal Bank, Ashutosh Khajuria, curated the full outcome of the changes in the monetary policy. He stated that the impact of stance change would affect the market more than the policy rate cut. "The stance change will lead to expectations that there will be more cuts in offerings and there will be negligible tightness of liquidity due to the accommodative stance," he said.
He also added that transmissions will take time in banks, as 80-85 percent of their balance sheets come from public deposits and it is difficult for banks to cut the deposit rates suddenly.
Adding on to the understanding of the bi-monthly monetary policy, Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life Insurance Company, said, "From an investment perspective the sharp fall in bond yields over the past month has benefited duration and bond funds. Presently, we prefer the short to medium term end of the yield curve."