From NEFT/RTGS fee waiver, Repo rate cut to GDP revision: Experts speak on RBI policy

The Reserve Bank of India (RBI) today announced key lending rate (repo rate) cut by 25 bps (0.25%). The central bank also announced several measures like removal of charges on NEFT and RTGS transactions. Industry experts and economists have welcomed the RBI policy decisions, especially the NEFT/RTGS fee waiver. The experts believe this will further boost digital transactions.  Raman Kumar, Chairman and Founder of CASHe, told Zee Business Online, "The waiver on RTGS and NEFT charges will further promote digital transactions. We are looking forward to a strong growth momentum in the coming fiscal which will be backed by robust investments by the government.”

Commenting on the repo rate cut, Kumar said, "The interest rates (in India) are amongst the highest in the emerging economies. The reduction in repo rate by 25 bps will directly bring down the rate of EMI which means consumers can now avail home, auto and other loans at much cheaper rates. This will encourage lending and credit thereby boosting the overall economic growth."

Mandar Agashe, Founder and Vice President, Sarvatra Technologies, also thinks that the RTGS/NEFT fee waiver will boost digital transaction. "With the waiver of charges on payment modes like RTGS and NEFT, RBI is clearly nudging the banks towards increasing digital payments."

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Agashe further said that the RBI move will benefit small traders who deal in small value transactions and operate on small margins. "RTGS and NEFT are much cheaper modes than other payment mechanisms like Cheques in terms of the cost involved in managing end to end transactions until settlement. This move will, therefore, benefit banks and the entire ecosystem by encouraging more volumes,” he said.

Gaurav Chopra, Founder & CEO, IndiaLends, said, “RBI’s decision to reduce repo rate by 25 basis points to 5.75%, augurs well for the retail lending sector. Amidst global uncertainty, subdued domestic industrial activity & CPI within RBI’s comfort zone of 4% within a band of + or – 2%, this anticipated reduction is a welcome move."

Chopra said that the rate cut would lead to a rise in the overall investment demand and improve credit environment of the economy. "Additionally, the decision to eliminate charges on fund transfers through RTGS and NEFT routes will provide the necessary impetus to digital fund movements,” he said. 

Commenting over the on-tap licensing of small finance banks, Vinay Bagri, Co-founder & CEO, NiYO, said, "RBI's decision to accept small finance bank applications on-tap is a much anticipated and welcome move as the current SFBs have been doing a commendable job on achieving the goal of financial inclusion. RBI should also look at a new category of license for new age digital banks or ‘Neo-Banks’, which operate as a differentiated banking platform solving a particular part of the financial inclusion problem in a robust and efficient manner.”

The RBI has revised it GDP projection for FY 2019-20 from 7.2% to 7%. "The downward revision of growth projection by the Reserve Bank of India (RBI) from 7.2 % to 7% in 2019-20 calls for the implementation of additional rapid policy interventions by both RBI as well as the Government. The unanimous decision by the Monetary Policy Committee (MPC) to cut the repo rate by another 25 bps is a step in the right direction," said Khushru Jijina, MD, Piramal Capital and Housing Finance.

Garima Kapoor, Economist, Elara Capital, said, "Drawing comfort from consistent softness in inflation trajectory, MPC cut policy repo rate for the third time this year to support benign growth conditions. A shift in the stance to accommodative is welcome as it will pave way for transmission to lending rates, which so far have been inadequate. We expect MPC to cut rates by an additional 50 bps through the year while continuing to fine-tune liquidity support through a combination of OMO purchases, forex swap and CRR cut."

“The combination of the repo rate cut, the change to an accommodative stance and the resolve to provide adequate liquidity, will provide the impetus to counter growth and investment headwinds. A review of the liquidity framework is a welcome move and should aid monetary transmission. Additionally, the easing of the leverage ratio requirement will boost bank lending and should serve as the much needed countercyclical stimulus,” said Zarin Daruwala, CEO, Standard Chartered Bank, India.