Reserve Bank spared the already beleaguered banks any further burden in its effort to suck out excess liquidity from the banking system, yet it tempered its kindness with a stern warning on inflation.
The Reserve Bank of India today kept the repo rate unchanged at 6 percent and hiked the reverse repo rate by 25 basis points to 6.25 percent.
The six-member monetary policy committee (MPC), headed by RBI governor Urjit Patel, Thursday maintained status quo on repo rate but revised the reverse repo rate upward by 25 basis points to 6 percent.
According to a CNBC-TV18’s MPC Poll, 100 percent participants expect no repo rate cut in the meeting. For the current year – 2017 – 80 percent respondents expect no cut, while 10 percent a 25 basis point cut. Another 10 percent also expect a 25 bps hike in repo rate in the on-going year.
Demonetisation also helped banks reduce loan rates by 70 bps without policy repo rate cut from Nov to Jan. On the other hand, the loan rates were reduced by only 15 bps from Apr to Oct despite a 50 bps cut by RBI.
Even as retail inflation has eased driven by a sharper than anticipated moderation in the prices of vegetables and strong favourable base effect, it masks some upturn in the prices of several items; prices of wheat, gram and sugar have been firming up.
Major factor contributing to the stable monetary policy rate could be impending concerns about inflation and, perhaps in the backdrop increase in the US Fed rates.
Awash with funds, banks may start cutting loan rates to productively deploy unexpected deposit surge; RBI lowers 2016-17 growth forecast by 50 basis points to 7.1 percent on demonetisation effect.
The Reserve Bank of India (RBI) on Wednesday kept its key lending rate â€”the repo rateâ€”unchanged at 6.25 percent against a widely-anticipated cut of 25-50 basis points.
There is a high likelihood of a 25 bps cut in the repo rate.
Almost 70 percent of the people are expecting a 50 bps rate cut by March 2017. Another 75 percent believe that the RBI will lower its gross value added (GVA) guidance to 7-7.5 percent from 7.6 percent due to demonetisation.
In a statement, the central bank said that all scrapped currency notes held in their chests will be counted as part of their cash balance.
In an interview to the Business Standard, HDFC Bank Managing Director Aditya Puri said that demonetisation shouldn't be looked at as a single, standalone event, but should be put in the context of overall measures that will drive India towards a cashless economy.
The expectations on a repo rate cut have been tempered with hike in cash reserve ratio (CRR), Icra said in a note.
The Reserve Bank has raised the cash deposit or reserve ratio limit for banks to contain liquidity surge post demonetisation. However, it has also assured it will revisit the limits once the government issues an adequate quantum of Market Stabilisation Scheme bonds. Here are 5 things you should know about MSS bonds and how they will help.
The Reserve Bank of India (RBI) hiked the cash reserve ratio (CRR), the percentage of cash deposits that banks have to maintain with RBI â€“ at 100% of the deposits (NDTL) accrued between September 16 and November 11 as incremental cash reserve ratio.
Equity benchmarks closed flat with a positive bias after consolidation on Monday but the broader markets outperformed on further value buying. Banks underperformed after CRR hike announcement by RBI while ITC helped the market close in the green.
Finance Ministry today said RBI's raising CRR became necessary due to increase in liquidity in the system as large sums of money in the form of scrapped Rs 500/1000 notes is being deposited by the public in banks.
After banning legal tender status of Rs 500 and Rs 1,000 notes since November 8, there has been a huge surge in banks' deposits. To reduce that surplus liquidity available with the banking system, the Reserve Bank of India, on last Saturday, announced temporary measures by applying an incremental cash reserve ratio.
Speaking to CNBC-TV18 from the sidelines of Pune Inc Conclave Power Minister Piyush Goyal said demonetisation has huge advantages. It will take India to digital banking and make it a cashless society.
Pradhan feels the next six months will be tough, and sentiment will remain bad as the economy gradually tilts from formal to semi-formal in the medium term
With a move to managing the excess liquidity in the system banking regulator Reserve Bank of India announced today that it woujld absorb a part of this extra cash by applying an incremental cash reserve ratio (CRR) as a purely temporary measure.
"RBI has decided to continue to provide liquidity as required but progressively lower the average ex ante liquidity deficit in the system from one percent of NDTL (net demand and time liabilities) to a position closer to neutrality," Governor Raghuram Rajan said in press release.
A status quo on rate action was factored in by experts as India grew at a phenomenal 7.9 percent for the March quarter and by 7.6 percent for the last fiscal year. Retail inflation, largely driven by food prices, inched up to 5.4 percent in April from 4.8 percent in the previous month, making it difficult for the RBI to cut rates any further
The new grammar of liquidity proposed by RBI is a challenge for itself as it now needs to demonstrate the same dexterity in its liquidity stance which can tougher as forecasts of currency withdrawal by the public, of dollar flows, and of government‘s unspent cash surplus can at best be approximate, says Latha Venkatesh of CNBC-TV18.