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.
The Reserve Bank of India kept repo rates unchanged at 6.50 percent, a move aligned with market expectations. Inflation forecasts for FY25 were also unchanged at 4.5 percent.
This increase however, is applicable only to new loans sanctioned and not existing loans, which means that older borrowers will not be impacted by these hikes.
Nilesh Shah stressed the importance of observing the global markets and maintaining cash to deploy during market corrections.
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
Will RBI continue to experiment in monetary policy in 2020?
There are precedents for Operation Twist in the US and in Japan
SBI is set to cut the interest rate on savings accounts with a balance of up to Rs 1 lakh by 25 bps
The interest rate under external benchmark shall be reset at least once in three months.
The RBI has cut repo rate four times (125 basis points) since January 2015. But the banks, Governor Rajan highlighted, have passed on less than half of the rate cuts to customers.
Increase in interest rate typically brings gold prices under pressure and the other way round.
This, coupled with the economic slowdown, continues to hold the industry performance in the red and a possible turnaround is still not expected in the coming months, he added.
Sandip Sabharwal of asksandipsabharwal.com says credibility of guidance forecast by technology companies is waning and PSU banks might find it difficult to raise money from the market.
Combating immense pressure on both bankers and corporates‘ front, the Reserve Bank Governor Raghuram Rajan maintained status quo in today‘s bi-monthly policy.
In an interview to CNBC-TV18's Latha Venkatesh, C Rangarajan, chairman, Economic Advisory Council, says that if inflation moves along the direction expected, today‘s rate hike may perhaps be the last in the series of raising the policy rate.
The Reserve Bank of India has given clear signals that it is watching the retail inflation rates closely and any adequate rise in inflation rates would compel it to increase repo rates which would lower fixed deposit rates substantially.
Indranil Sengupta, chief economist, BofA ML, in an interview to CNBC-TV18 says he expects the Reserve Bank of India to hike repo rates by 25 basis points (bps) in its December policy, following which the Governor is likely to hold rates.
Speaking to CNBC-TV18, Arun Kaul, chairman, UCO Bank, says the decision on increasing base rates will depend on the cost of funds. While banks have reduced rates, if the cost of funds go up, then banks will be forced to pass on the burden to customers, he adds.
For deposits above one year to less than two years, the interest rates would now be 9.05 percent, up from 8.75 percent. For those of five years and above to less than 8 years would now be 9.05 percent, up from 8.75 percent.
Keki Mistry of HDFC feels that the RBI's steps on Monday will bring down the short term rates by 50 bps. However, with the possibility of higher inflation going forward, repo rates may be hiked, he says.
Kotak Mahindra Bank feels that the bond market is still worried about the absence of fiscal consolidation and that will keep it under stress going forward.
The message was clear from Raghuram Rajan's debut monetary policy meet on September 20. The focus is to address inflation, while the message to the government is to tackle growth.
Raghuram Rajan has made inflation his top priority, and this focus would drive all the policy actions going ahead, says Samiran Chakrabarty of Standard Chartered.
A Krishna Kumar, MD of State Bank of India says the country‘s largest public sector bank has started an investigative audit on the allegations of wrongdoing levied by online portal Cobrapost. Kumar expects to complete the internal inquires by next month.
The previous year has not been very fruitful for the consumer durables industry. The increased inflation and Interest rates clubbed with multiple price increases due to increase in input costs have constrained the purchasing power of the middle class that ultimately has resulted in postponement of purchase.