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After the stellar growth numbers on May 30, followed by an emphatic GST collection data, RBI last week delivered another positive surprise with a 50-bps rate cut. With a record dividend providing government room to spend on capex, and tax cuts helping urban demand, will RBI cuts provide further boost to the economy. More important, can India keep its tryst with destiny to become a developed country by 2047 or does it risk falling into a middle-income trap? Watch Ishaan Gera in conversation with Rajnish Gupta, Partner, Tax and Economic Policy Group, EY India and Paras Jasrai, associate director, India Ratings and Research.
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The cash reserve ratio currently stands at 4% of deposits, which needs to be reported by banks to the Reserve Bank of India on a fortnightly basis. Banks set aside 90% of this requirement daily at present.
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Data shows that the FIT era freed up funds for banks enabling them to use this for productive lending purposes
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If banks don’t respond to the CRR cut by passing on the excess liquidity to the borrowers through cheaper loans, the ball will be back in the RBI’s court to offer a growth stimulus post the disappointing Q2 numbers.
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Some experts believe that the durable liquidity will also enable banks to enhance lending to various sectors and improve net interest income.
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This is the second time that RBI has reduced cash reserve ratio in four years. In March 2020, CRR was reduced from 4 per cent to 3 per cent to infuse liquidity in the system
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Kotak recommends a staggered 50-bps CRR cut at the upcoming RBI MPC meet, which would inject approximately Rs 1.2 lakh crore of liquidity, signaling the start of a monetary easing cycle.
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RBI today kept the cash reserve ratio unchanged at 4.50 percent, a move that led to a drop in government bond yields. The benchmark 10-year yield closed at 7.49 percent today, 3 bps below yesterday’s closing level. The shorter five-year bond yields dropped 10 bps.
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"My assessment it that in February policy, the RBI could take a pause to assess if the government’s fiscal position is changing. The new fiscal year budget would be out and the fiscal position for FY23 would be known."
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RBI has raised the repo rate by 50 basis points, an increase for the second time in five weeks at the conclusion of the monetary poly committee’s three-day meeting on June 8. Here’s what Shaktikanta Das said during the policy press briefing.
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Ten-year bond yields fell 7 basis points to 7.451 percent from its previous close of 7.518 percent, while shorter four-year bond yields dropped 12 basis points, three-year bond yields lost 9 bps and two-year yields erased over 14 basis points
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The latest hike comes after the Reserve Bank announced a 40 bps increase in repo rate in an off-cycle policy move in May.
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RBI governor Shaktikanta Das announced a 40-basis-points hike in the key lending rate and raised the cash reserve ratio by 50 basis-points in an unscheduled announcement on May 4.
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In a surprise move on May 4, the RBI increased the policy repo rate by 40 bps to 4.40 percent with immediate effect.
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The 10-year bond yield jumped to 7.38% after RBI in a surprise announcement hiked the repo rate by 40 basis points to 4.4% and the cash reserve ratio by 50 bps to 4.5%
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RBI Governor Shaktikanta Das, in a statement, permitted banks to allow a moratorium of three months on equated monthly instalment (EMI) payments
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Addressing the media via teleconferencing, RBI governor begins his policy statement saying ‘Tough times do not last but tough people do and tough institution’. I think we are in those times right now.
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Vaibhavi Khanwalkar gets in conversation with Moneycotrol's Deputy Executive Editor, Ravi Krishnan to find out the possible implications of the rate cut.
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The RBI should also reduce the Cash Reserve Ratio (CRR) to ensure enough liquidity
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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.
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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.
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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.
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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.
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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.
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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.
