RBI Monetary Policy Committee Begins 3-Day Meet
RBI's Monetary Policy Committee (MPC) began a 3-day meeting on Monday.
The six-member MPC, headed by RBI Governor Urjit Patel, is meeting for three days for the first time instead of the usual two days due to some administrative exigencies.
The resolution of the second bi-monthly monetary policy meeting in the current financial year, 2018-19, will be made public on Wednesday afternoon.
It was in January 2014 that the RBI had last raised the short-term lending rate (repo) to 8 percent; since then it has either reduced it or maintained status quo.
Reserve Bank Changes NPA Norms for MSMEs
The RBI eased NPA classification norms for such units facing input credit linkages and associated issues under the Goods and Services Tax.
"In continuation of support and relief to MSMEs, NPA recognition for GST and non-GST MSMEs is now at 180 days for dues up to 31 December, 2018," Financial Services Secretary Rajiv Kumar said.
Now 180-day NPA norms are applicable for all micro, small and medium enterprises dues between 1 September, 2017 and 31 December, 2018 if the account was standard on 31 August, 2017, he said, adding this dispensation covers both registered as well as unregistered MSMEs.
With regard to GST registered MSMEs, 180-day NPA norms will be brought back to 90 days only in a phased manner, starting 1 January, 2019.
For non-GST registered MSMEs, NPA norms would revert to 90 days from 1 January, 2019.
BSE Sensex, Nifty Closes on High Depite Repo Rate Hike
The BSE Sensex surged almost 276 points to end above the key 35,000-mark today even as the RBI hiked the policy rate by 0.25 percent on inflation concerns. However, the RBI retained the GDP growth forecast for 2018-19 at 7.4 percent on hopes of further boost to investments and higher consumption.
The central bank hiked the benchmark lending rate for the first time in four-and-half-years on inflation concerns arising from a surge in international oil prices. The repo rate now stands at 6.25 percent.
The BSE Sensex, which opened strong at 34,932.49, fell after RBI's policy announcement but soon recovered to touch the day's high of 35,230.54. It finally ended at 35,178.88, up 275.67 points, or 0.79 percent.
The gauge had lost 419.17 points in the previous three sessions. On similar lines, the NSE Nifty, after shuttling between 10,698.35 and 10,587.50, finished the session 91.50 points, or 0.86 percent higher at 10,684.65.
Smaller Housing Loans Likely to Be Cheaper
While the rate hike might result in banks raising their home loan rates, the central bank has given the borrowers something to cheer by increasing the priority sector lending (PSL) slabs, which is likely to make low-ticket sized loans cheaper.
Home loans up to Rs 35 lakh in metros (with population of 10 lakh and above) will now qualify for the benefits of priority sector lending, against up to Rs 28 lakh earlier.
Similarly, loans up to Rs 25 lakh will now qualify under PSL for other centres, compared with the up to Rs 20 lakh earlier.
However, the house cannot cost more than Rs 45 lakh in a metro and Rs 30 lakh in other centres.
Rate Hike Won't Have Major Impact on Home Sales: Experts
The Reserve Bank's rate hike will not have a major impact on home sales, which has seen a revival in the past few months, say experts.
The apex bank for the first time in over four years raised the repo rate, or the short-term lending rate, by 0.25 percent to 6.25 percent, on inflation concerns arising from surge in oil prices.
Naredco national president Niranjan Hiranandani said the hike is justified on account of inflationary trends, global hardening of interest rates as also petroleum prices moving upwards.
"It will not make a major difference to real estate. However, in the long run, we would prefer rates coming down," he said.
Property consultant JLL India chief executive officer and country head Ramesh Nair said the hike may seem to dampen sentiments in the market, but in terms of real estate, may have little or no impact.
"As almost all home loans these days are on floating rates, the rise and fall in home loan rates does not impact the performance of residential real estate sector much and tends to balance each other out over long term," he reasoned.