“We need to understand the ‘why’ in what the RBI Governor says rather than just the ‘what’,”: Niranjan Hiranandani

MUMBAI, 04th JUNE 2015: In a move that was widely anticipated, the Reserve Bank Governor Raghuram Rajan cut the repo lending rate by 25 basis points to 7.25 per cent during the review on 02 June 2015. This brought the cumulative rate cut to 0.75 per cent since January this year. “Any rate cut helps reduce the overall burden for home buyers and has the potential to boost residential real estate sales,” said Niranjan Hiranandani, MD, Hiranandani Constructions Pvt. Ltd.

“The cut was anticipated, given the RBI’s apparent comfort with consumer price inflation and the marked slowdown in industrial growth,” said Niranjan Hiranandani. “While further cuts from the RBI will obviously be welcome, we also need to understand the RBI Governor’s sentiments rather than just focus on what he said,” he added.

“To my mind, the important thing that the RBI Governor said was, ‘banks have started passing on some of the rate cuts by the RBI in the past’,” said Niranjan Hiranandani. “It is a nudge to banks to go the whole mile, and pass on the advantage to home loan takers and to corporate business houses. Unless banks and financial institutions pass on the reduction in rates over the past few months  to customers, consumption will remain subdued – as a consequence, the investment cycle will falter,” he added. “Given that 2015 is expected to have a bad monsoon, I think the RBI Governor has done the right thing – the cut should end up being a  fine balancing act between growth stimulus on one side and being cautious to curb retail inflation on the other,” added Niranjan Hiranandani.

“From a real estate perspective, while an additional reduction in the CRR would have given a bigger boost to the struggling real estate sector in form of improving its cash crunch scenario, I hope banks and financial institutions need to take the RBI Governor’s statement in the right spirit and pass on substantial reduction in rates to their customers, so that consumption and the investment cycle pick up,” said Niranjan Hiranandani.

“We need to understand the sentiment when the RBI Governor says: ‘the RBI is a not a cheerleader – other people in the economy who can play that role’. Hopefully, banks and financial institutions will take the cue, and this should result in reduced lending rates, which would benefit the borrowers,” said Niranjan Hiranandani. “I am hopeful of further rate cuts, and hope that the RBI will take the right call at the right time on this,” he concluded.

Keywords – Niranjan Hiranandani, RBI, repo rate, RBI Governor, rate cuts, CRR, financial institution, investment cycle, corporate houses, CPI, inflation, crude oil

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