Industry reactions to RBI increase in repo rates

RBI increased policy repo rate by 50 basis points (bps) to 5.9% making loans expensive.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on September 30, 2022 increased policy repo rate by 50 basis points (bps) to 5.9% making loans expensive. 

The MPC also lowered the growth projection of FY23 from 7.2% to 7%.

Following are the industry reactions

The back-to-back repo rate increase will make borrowings costlier for the industry already reeling under demand slowdown from key export markets, chairman of engineering exporters body EEPC India Mahesh Desai said. Engineering goods exports saw a sharp decline in shipments in August signalling tough times ahead, he said.

"We hope the government would take policy measures to minimise the impact of external factors on the engineering sector. The lowering of FY23 GDP growth forecast by RBI to 7% is primarily the effect of external factors and hence requires fresh measures to boost exports", Mr. Desai said in a release.

While increase in the repo rate was expected amid the central bank intensifying its efforts to tame inflation, the possibility of banks passing on this increased cost to borrowers during the ongoing festive season is low, said Dhruv Agarwala, Group CEO of Housing.com.

"Considering that a large number of home buyers in India make their purchase decision during this time of the year, financial institutions would not like to dampen the festive spirit by effectuating a rate hike immediately, " he said.