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RBI keeps repo rate unchanged, receives mixed reviews

| | Dec 08, 2016, at 12:37 am
Mumbai, Dec 7 (IBNS): The Reserve Bank of India's (RBI's) decision to stick to its old repo rate garnered mixed reviews from the markets.

While some said they were happy with it, others have termed it as a disappointment.

Chanda Kochha, MD and CEO of ICICI Bank said, “The RBI has maintained stability in monetary policy with a focus on the medium-term inflation targets being sustainably achieved, while continuing to be supportive of growth. The policy has maintained an accommodative stance while taking into account global developments and domestic economic conditions."

KVS Manian, President, Corporate, Institutional & Investment Banking, Kotak Mahindra Bank Limited, said, “There was a  broad expectation for a 25 basis points repo rate cut, which would have given banks room to cut lending rates. To that extent, the markets are disappointed. But the withdrawal of the incremental CRR effective December 10, 2016, does  give banks some flexibility to cut rates."

Manian said that the RBI seemed far less sanguine on inflation than the rest of the market.

He said that with this move, the RBI has shown faith in the market and is optimistic that things will be normal following demonetisation.

"On demonetization, the message from the central bank seems to be that that things will get back to normal soon, and they see it as transitory. On that front, they seem far more optimistic than the market,” Manian added.

Reacting on the same, Anuj Puri, Chairman & Country Head, JLL India, said, "For the real estate sector, which is currently reeling under pressure from the recently-announced demonetization of high-value currency notes, a rate cut could have definitely allayed fears of a near-term loss of momentum."

"What could offer the real estate community some respite is if the policy committee would continue to remain accommodative and act positively on any opportunity available for rate cuts as soon as they arise going forward," he added.

Contrary to the expectations of many,  Reserve Bank of India Governor Urjit Patel left the repo rate unchanged in the first policy meeting post demonetisation, reports said.

The six-member  Monetary Policy Committee (MPC) of RBI decided not to cut the repo rate from 6.25 percent.

The Monetary Policy Committee (MPC)  in its October policy review had cut interest rate by 0.25 per cent .

The RBI's decision triggered a fall in the stock market with the BSE Sensex and NSE Nifty going down.

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