Moody's Investors Service has said the Reserve Bank's efforts in bringing down inflation is credit positive for the country and hoped that the central bank will continue to remain vigilant in sticking to the target level.
Moody's Investors Service has said the Reserve Bank's efforts in bringing down inflation is credit positive for the country and hoped that the central bank will continue to remain vigilant in sticking to the target level.
The high inflation, it added, has been a constraint on the credit profile of the country in the past and food price volatility makes India vulnerable to inflation spikes.
"The RBI's success in bringing inflation to within its targets is credit positive. Today's announcement supports our expectation that the central bank will remain vigilant to the risks to its targets," Moody's Investors Service Associate MD - Sovereign Risk Group, Atsi Sheth said.
The RBI, in its fifth bi-monthly policy statement on Tuesday, kept key policy rates unchanged and said it expects inflation to be 6% by January 2016 and 5% by March 2017, respectively.
"From a sovereign credit perspective, the actual interest rate measures taken/not taken by the RBI do not affect the credit profile directly.
"Rather, it is the effectiveness of measures in meeting central bank goals and the transparency with which these measures are implemented that determines our assessment of institutional strength," it said.
The RBI has lowered interest rates by 1.25% since January, but the banks on an average have only passed 0.60% rate cut to borrowers.
India Ratings & Research Principal Economist Sunil Sinha said that by front loading the cut in the previous policy RBI had given enough indication that further rate cuts are unlikely to come in any time soon.
Real estate consultancy firm Knight Frank India CMD Shishir Baijal said the sector does not see any dampening of spirits as a total of 1.25% cut in the rates is already done across the year and now much depends on how banks transmit the benefit to home buyers.
"Regardless of this cumulative cut, banks on their own should be able to transmit more benefit to the end consumers as the cost of funds is becoming cheaper with improved liquidity conditions," Baijal said.
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