Experts see RBI's rate pause as move to protect economy, currency amid rising global risks
New Delhi, June 5
Economists and industry experts largely welcomed the Reserve Bank of India's decision to keep the repo rate unchanged at 5.25 per cent, saying the central bank has balanced the need to support growth while remaining cautious about inflation and external risks arising from the ongoing West Asia crisis.
Many experts said the RBI's accompanying measures to attract foreign capital and strengthen external financing conditions were among the most significant announcements of the policy.
Radhika Rao, Senior Economist and Executive Director at DBS Bank, said the central bank had taken several steps to support capital inflows and stabilise the rupee.
She stated "Announcements included widening the universe of eligible bond securities, discounted swap windows for FCNR B deposits, moves to boost concessional external commercial borrowings, amongst others. Separately, tax breaks in withholding (currently 20 per cent) and capital gains for the debt investors".
She said while benchmark rates were left unchanged, the policy guidance remained cautious due to inflationary risks from the West Asia conflict and a sub-normal southwest monsoon.
Sujan Hajra, Chief Economist and Executive Director at Anand Rathi Group, said the decision to hold the repo rate at 5.25 per cent was widely expected. However, he said the key takeaway from the policy was the RBI's increasing focus on external vulnerabilities.
"Higher oil prices threaten to widen the current-account deficit, while persistent foreign portfolio outflows and elevated global uncertainty could make external financing more challenging. The central bank's accompanying measures to attract capital and strengthen external financing conditions signal a clear shift in priorities," he said.
Vikram Chhabra, Senior Economist at 360 ONE Asset, described the meeting as a high-stakes one given pressure on the rupee, rising inflation and moderating growth.
He said holding rates was the right decision and added that the RBI had addressed the core issue by announcing measures to improve capital flows. He also said the growth-inflation trade-off is becoming more challenging and may require close monitoring in future meetings.
Industry leaders also welcomed the policy decision.
Sarbvir Singh, Joint Group CEO of PB Fintech, said rate stability is important for everyday borrowers, including salaried professionals, self-employed individuals and small businesses. He said the RBI had struck a balance between supporting growth and remaining vigilant on inflation.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, said the decision would provide stability and predictability to the real estate sector. He noted that favourable financing conditions would benefit both homebuyers and developers at a time of global volatility.
Parveen Jain, President of NAREDCO, said the decision to keep the repo rate unchanged at 5.25 per cent would help maintain market stability and support housing demand, particularly in the mid-income and affordable housing segments. He added that steady borrowing costs would ensure that homebuyers do not face any additional burden on loan repayments.
Sidharth Chowdhry, Managing Director at Dalcore, said "Over the last few quarters, we have seen strong demand from buyers who are looking beyond short-term market fluctuations and focusing on long-term value, lifestyle, and connectivity. At Dalcore, we believe the housing market will continue to witness healthy momentum, supported by strong end-user demand and positive economic fundamentals. Today's decision further reinforces confidence in the sector's long-term growth story".
Overall, experts believe the RBI's latest policy reflects a cautious approach amid rising global uncertainties, with a strong focus on managing inflation risks, supporting the rupee and ensuring financial stability while preserving growth momentum.
— ANI
Reader Comments
The real estate guys are celebrating, but what about small businesses and self-employed folks like me? Sarbvir Singh said rate stability helps but honestly, with input costs rising due to global factors, we need more than just stable interest rates. Hope the government comes up with some stimulus too. 🤷♀️
Smart move by RBI. Holding rates while bringing in measures to attract foreign capital shows they're thinking long-term. The FCNR deposit swap window is a clever way to stabilise the rupee - we've seen this work before. But I do wish they'd addressed the real estate prices because even with stable rates, affordable housing remains out of reach for many in cities. 🏠
As someone who tracks EM economies, India's RBI is doing a stellar job navigating global turmoil. The 5.25% repo rate keeps us competitive while the capital flow measures are well-timed. However, the real test will come if oil prices spike further - that current account deficit needs watching. Good policy on paper, execution matters now.
Honestly, all these expert opinions sound similar but what about the ground reality? My bank FD rates have barely moved, while inflation at the grocery store is still eating into savings. The RBI should also crack down on banks that don't pass on benefits to depositors. Stable rates are fine but we need real consumer relief too! 💸
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