“RBI’s decision to keep the repo rate unchanged at 6.25% is disappointing, though not unexpected. The fact that credit growth has slipped to multi-year lows, despite lending rates falling by nearly 150 basis points since early 2015, is proof that other factors are at play. Demonetisation has accelerated the transmission of rate cuts over the past two months. While it has benefited select borrowers, it has squeezed incomes for most savers, with deposit rates plummeting over two percentage points over the past two years.
A cut in policy rate may do more harm than good if inflation creeps up with the rise in global commodity prices. India needs positive interest rates to induce savings and push up investments. Nonetheless, since demand in real estate and allied industries remains sluggish, a rate cut could have improved liquidity and created renewed interest in property purchase.”
Vineet Relia, Managing Director, SARE Homes