The Reserve Bank of India (RBI) announced certain monetary measures in its third quarter review today (29th Jan 2013). Some of the key policy measures are –
- · 25 bps reduction in repo rate from 8% to 7.75% (consequent adjustment to reverse repo rate to 6.75%)
- · Reduction of bank rate to 8.75%
- · Reduction of CRR by further 25 bps to 4%
The RBI has taken a huge positive step by announcing the above policy measures. RBI has shown commitment to improving liquidity in a cash-strapped economy by reducing the CRR further in this policy coupled with reduction in repo and bank rates.
Liquidity is expected significantly improve in the economy on the back of the reduced repo rate, CRR and bank rate. Consequently, there should be a revival in investment and growth – including in the real estate space. Industrial activity, which has been sluggish last year, should bounce back in the medium term.
Inflation should also witness some easing with at least the supply side being addressed and cost-push pressures being mitigated. The RBI’s policy is definitely a key to boosting real estate market sentiment and sending out positive signals to global investors.