RBI's rate cut may encourage housing demand in Mumbai.

Q: Hey, Have you heard about the RBI's second rate cut?

Abhinandsavalla, Mumbai

5th March 2015

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Replies (8)

@Shantanu,
For the moment, bankers across the board welcomed the rate cut move, which comes within days of the Budget'15 and an agreement being reached between RBI and the government over inflation targeting.

Private sector lender Yes Bank's Rana Kapoor said he expects cuts of 1.50% more this fiscal which will help boost the sentiment and re-ignite investments.

Similarly, Bank of Maharashtra's Executive Director R K Gupta said the rate cut shows the central bank's comfort about the quality of fiscal consolidation and is positive for growth.

pradyumanapte, Mumbai

8th March 2015

Comment

@Rajat,
Even the RBI has also changed the methodology of determining the base rates, hoping for a quicker commitment of its policy measures.

Even though banks have already cut deposit rates, Rajan had said they might be utilising the expansion in margins to repair their balance sheets.

Shantanu Kumar, Mumbai

8th March 2015

Comment

@Arup,
As per Reserve Bank Governor Raghuram Rajan, who has been serious of banks for not passing on the benefits of a rate cut in the past, repeated that lenders keep an eye on to be faster in raising rates than cutting rates. He will examine if there are any limitation in passing on cuts. In spite of a generalised fall in the cost of funds, banks are yet to pass through these effects, as also the effects of the policy rate cut on January 15, into the detail of lending rates.

Rajatrawal, Mumbai

7th March 2015

Comment

As per Chanda Kochhar, ICICI Bank's Managing Director and Chief Executive, Repo Rate cut is a welcome step that indicates RBI's comfort with the inflation outlook and its sensibleness to rising indicators. It also reflects the number of institutional reforms and policy measures outlined in the Budget, which lay the foundation for sustainable growth. The cut should help move the economy forward on a positive growth path.

Arup rajan, Mumbai

7th March 2015

Comment

Right Sandeep,
Country's largest bank SBI also hinted at a review of its base rate or the minimum rate of lending. Largest private sector lender ICICI Bank welcomed the rate cut, but did not say whether they will pass on the lower cost of funds to borrowers.

Miraniyatin, Mumbai

6th March 2015

Comment

Even most of the bankers today hinted at lowering lending rates, but pressured monetary policy gets granted with a fall behind. Since there is a lag effect for monetary transmission, the effect of the previous 0.25% cut together with the present reduction would focus attention on banks to review their base rates.

Sandeep Mhatre, Mumbai

6th March 2015

Comment

@Manish,
Earlier, the rate cuts announced in January had not put into action by the banks, but a cumulative cut now amounting to 0.5%, will increase lending powers of the banks. It will allow banks to cut down interest rates on home loans allowing new consumers to take advantage of the low interest rates in the real estate market.

Anuj Gupta, Mumbai

5th March 2015

Comment

Righ Anuj,
Yesterday, 4th March, RBI cut repo rate by 25 basis points to 7.5%. It had earlier reduced the rate by 25 basis points on January 15. The rate cut may not wakeup demand immediately, but there is an optimism, and positive sentiment is finally moving towards ground action.

Manisbapu, Mumbai

5th March 2015

The demand for housing has been weakening for nearly two years now in the backdrop of unaffordable property prices and high interest rates. The Reserve Bank of India's second surprise rate cut outside the regular policy review may not boost the housing demand immediately. but is being seen as reversing the direction of rate cycle and kick-starting the housing demand.

Anuj Gupta, Mumbai

5th March 2015

Comment

But the developers are excited by the move to soften interest rates which would make home loans cheaper and help improve the sluggish sales scenario. A possible reduction in construction finance, currently available at up to 16%, is also seen helping them cut financing costs.

Manisbapu, Mumbai

5th March 2015