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Last Updated : Mar 16, 2020 05:49 PM IST | Source: Moneycontrol.com

No surprise from RBI: here's what experts are saying

The RBI's regular monetary policy review is scheduled for March 31 to April 3

The market was hoping for a rate cut from the Reserve Bank of India (RBI) in today's press conference, but the central bank said the rate decision will be taken by the MPC and that no possibility can be ruled out.

The RBI's regular monetary policy review is scheduled for March 31 to April 3.

On March 15, the US Federal Reserve, in its second emergency rate cut in less than two weeks, has cut its key interest rate to virtually zero and launched a massive USD 700 billion quantitative easing programme.

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Benchmark indices ended lower on Monday with Nifty slipping below 9,200 level on the back of increasing fears of Coronavirus.

At close, the Sensex was down 2,713.41 points or 7.96% at 31390.07, and the Nifty was down 757.80 points or 7.61% at 9197.40.

"The RBI has been taking some calibrated measures to ensure financial markets and institutions remain sound and resilient," said RBI Governor Shaktikanta Das.

"The RBI proposes to conduct another 6 months US dollar/ Rupee sell-buy swap on March 23. It will also conduct LTRO in multiple tranches up to a total amount of Rs 1 lakh crore at the policy rate. This will be followed by a review of the performance of LTRO," he further said.

On Yes Bank case, Shaktikanta Das said that the moratorium on Yes Bank will be lifted on March 18 at 6 pm and a new board will assume position on March 26 and the administrator will vacate office.

We do believe, including the investing banks, that this is a credible revival plan for Yes Bank and it will work. Depositors can remain assured that their money is safe. With regard to the economic fallout of COVID-19, the RBI stands ready to take whatever action is required at the appropriate time, he said.

Check out what market experts say on RBI's recent announcement:

Mihir Vora, Director & Chief Investment Officer, Max Life:

The LTRO and swap announcements by RBI were expected, given the global environment and actions by other central banks. Rate action is also needed as the global economic situation is highly uncertain. We expect a pre-policy action by the MPC, maybe as soon as this week.

Fiscal measures are also needed in the current circumstances. We need coordinated action by RBI, Government and other market regulators and exchanges to prevent dislocation in any of the multiple markets and to cushion the impact of the Coronavirus-led slowdown.

 

Keki Mistry, MD & CEO at HDFC:

Don’t think that we are in a situation where a rate cut is warranted right away. Ensuring liquidity is more critical than the cutting rates at this moment. He believes that the Yes Bank will come out of this situation a lot stronger as RBI ensured everyone that depositor money in the bank will not be lost.

It is difficult to say how many basis points the reduced costs of funding will be, while India has more monetary space than compared to most large economies.

HR Khan, former deputy governer, RBI:

State governments withdrawing money from private banks would be disastrous for financial stability. State governments must be calm when dealing with situations like the Yes Bank crisis.

Suman Chowdhury, President – Ratings at Acuité Ratings & Research:

RBI has reiterated its support for the revival of Yes Bank, the plan for which has been finalized by both the regulator and government with an upfront equity infusion of Rs 10,000 crore from a group of public and private sector banks led by RBI. Hopefully, this will arrest any large scale withdrawals of deposits once the moratorium on the bank is lifted and prevent any panic among private sector bank depositors.

While RBI did not announce any immediate rate cut, it did indicate that a rate cut will be considered during the next MPC meet. It also announced two important liquidity measures – i.e. a rupee-dollar swap to prevent any undue volatility in the exchange rate and additional LTRO to the extent of Rs 1 lakh crore to address any sudden liquidity requirements in the banking system.

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First Published on Mar 16, 2020 05:49 pm
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