As the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its crucial three-day meeting on Monday, industry experts suggest the central bank is likely to maintain the current repo rate amid rising global uncertainties, particularly in the Middle East.
RBI Governor Shaktikanta Das and the six-member committee are focusing on the economic landscape and interest rate policies, and they will announce their formal decision on 9 October.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, highlighted the geopolitical risks that could fuel inflationary pressures.
“The situation in the Middle East is adding strain to global oil prices, which could heighten inflation concerns in India. Despite elevated interest rates, India’s economic growth has remained resilient, with consumption indicators such as home sales maintaining robust momentum. This sustained growth provides adequate cushioning for the RBI to keep the repo rate at the existing level of 6.5 percent,” Baijal said.
Analysts also pointed to the imbalance between credit and deposit growth as another factor pushing the central bank toward holding the rate.
Credit growth has surged ahead of deposits, and experts believe the RBI might opt for a cautious approach, keeping policy rates tight for a more extended period.
For the real estate sector, a cut in the repo rate would lead to more affordable home loans, easing the financial burden on buyers.
‘Interest Rates Key To Boosting Festive Housing Sales’
Anuj Puri, Chairman of Anarock Group, noted that the housing market is particularly sensitive to changes in borrowing costs.
“Of course, interest rates are not the sole factor to influence purchase decisions as property rates also play a big role. More attractive interest rates can help improve overall affordability, and this can help catalyse housing sales during the festive season. Improved sales also benefit developers as better sales improve their cash flows and reduce their borrowing expenses for projects,” Puri explained.
While the recent rate cut by the US Federal Reserve may have raised expectations of a similar move by the RBI, experts argue that the global economy’s instability due to ongoing geopolitical tensions calls for a more measured response.
They believe that the central bank will tread carefully and is likely to keep the repo rate steady until the external pressures subside.
The MPC’s decision is being closely watched, as it will provide insights into how India navigates both domestic economic conditions and the broader global landscape in the months ahead.
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