India's central bank kept its key repo lending rate unchanged at 6.75 percent on Tuesday.
Bond market expects the Reserve Bank of India to cut the repo rate after the government buys back gilt worth over Rs 84,000 crore (Rs 840 billion), hopefully this month.
CRR remains unchanged at 4%; first repo rate cut since May 2013.
As far as the Indian households are concerned, although the leverage ratio in this basket has multiplied nearly 3 times in the past decade, it is still well below not just developed but also most other developing economies.
Banking shares are down up to 11% after the Reserve Bank of India has increased the policy repo rate by 25 basis points from 7.25% to 7.5% with immediate effect.
The Reserve Bank of India on Saturday decided to reduce the one-day and 14-day repo rate under the liquidity adjustment facility by 0.5 per cent to 4.5 per cent with effect from Monday.
Reserve Bank of India governor Bimal Jalan reiterated Monday the bank's soft monetary bias but said there was no immediate plan to cut the short-term repo rate.
As the policy rate has seen a steady increase since May 2022, the percentage of loans offered at interest rates below 8 per cent have declined sharply, dropping from 53 per cent in March 2022 to 18 per cent by June 2023, according to a report by the Reserve Bank of India (RBI). The share of bank loans with interest rates of 10 per cent or higher rose from 22 per cent to 34 per cent during this period, reflecting the impact of a 250 basis point (bps) hike in the policy repo rate by the RBI's Monetary Policy Committee. In response to the rise in repo rate, 32 domestic banks have made corresponding upward revisions to their repo-linked external benchmark-based lending rates (EBLRs), aligning them with the magnitude of the rate hike.
The highlights of RBI's bi-monthly monetary policy announced by Governor Shaktikanta Das:
LIC Housing Finance (LICHF) delivered a healthy FY24 with improvements in net interest margin (NIM) and credit costs and an improved return on assets of 1.7 per cent compared to an average of 1.3 per cent between FY14-FY23. Loan growth was low due to technology upgrades to the platform in H1FY24, though momentum improved in H2FY24. In Q4FY24, the net interest income (NII) came in at Rs 2,250 crore.
The central bank has also left the Bank Rate and the Cash Reserve Ratio unchanged at 6 per cent and 5 per cent, respectively, in the annual policy announcement 2007 released on Tuesday.
This is the fifth straight cut in rates by the Reserve Bank of India in as much policy reviews in 2019, and takes the total quantum of reductions to 1.35 per cent.
The Reserve Bank has kept the key policy rates unchanged, while the Cash reserve Ratio (CRR) has been cut by 25 bps to 4.25%.
Among the Sensex constituents, 20 stocks ended the session in green with HDFC Bank, Titan, Tech Mahindra, and Asian Paints being the major gainers. TCS, Maruti, Kotak Mahindra Bank and Bajaj Finserve were the other gainers. In contrast, SBI, Bharti Airtel, JSW Steel, PowerGrid, ITC and Reliance closed the trading with losses.
The primary focus of monetary policy remains the containment of inflation and anchoring of inflation expectations.
High frequency indicators suggest that a growth recovery is underway, but very tentatively and with weak legs, says Saugata Bhattacharya.
Banks and realty among the most hit on account of high borrowing costs.
Most members of the Reserve Bank of India's monetary policy committee (MPC) decided to stick to the course on bringing retail inflation to the target of 4 per cent while voting for maintaining status quo in the April review, except external member Jayanth Varma who voted for a 25 bps cut in the repo rate. "I believe that the extant monetary policy setting is well positioned," RBI governor Shaktikanta Das said in the minutes of the policy review, which came out on Friday. "Monetary policy transmission is continuing and inflation expectations of households are also getting further anchored.
Reserve Bank of India chief Bimal Jalan reiterated on Monday the bank's soft monetary bias but said there was no immediate plan to cut the short-term repo rate.
The muted CPI inflation print at 5% earlier this week, followed by a similar WPI number released Wednesday, seems to have spurred India's central bank into action, is how the economists are reading into Reserve Bank of India governor Raghuram Rajan's 25 basis point cut in repo rate.
Since November 3, the day the central bank's special window was opened, bids worth Rs 2,775 crore (Rs 27.75 billion) were placed at the auctions against the total outstanding amount of Rs 60,000 crore (Rs 600 billion) at the fixed rate of 7.5 per cent. "It's a commercial decision of banks to lend money to NBFCs. It implies that banks are still cautious about lending to NBFCs and they might take some more time to start lending normally to us," said an NBFC chief.
The Reserve Bank of India on Friday decided to keep the benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance as the economy is yet to recover from the impact of the second Covid wave.
The Reserve Bank of India (RBI) is likely to take a "more dovish" stance in its upcoming monetary policy review on December 2 and may go in for a cut repo rate in February, according to a British brokerage house report.
For over a decade, HDFC Bank consistently outperformed industry growth rates in both deposits and advances, maintaining impeccable asset quality. Amid a landscape where other banks struggled with soaring non-performing assets (NPAs), HDFC Bank thrived, eventually surpassing ICICI Bank to become the largest private sector lender in India. Its net interest margin (NIM) remained stable in the range of 4.1-4.4 per cent.
The Reserve Bank on Friday said India is poised to become the growth engine of the world as it retained the GDP projection for the current fiscal at 6.5 per cent. Unveiling the bi-monthly monetary policy review, Reserve Bank of India (RBI) Governor Shaktikanta Das said the domestic economy exhibits resilience on the back of strong demand.
Fundraising through qualified institutional placement (QIP) has revived this year, led by commercial banks, after a lacklustre 2022. According to data compiled by Prime Database, Indian companies have raised Rs 53,070 crore in 2023 so far, of which seven banks - Union Bank of India, Indian Bank, Bank of India, Federal Bank, IDFC First Bank, Bank of Maharashtra, and J&K Bank - account for Rs 21,290 crore, or about 40 per cent. If other financial institutions are included, the figure surges to Rs 26,690 crore.
Home loan consumers shouldn't rejoice yet expecting a cut in their home loan rates, feels Harsh Roongta, CEO, Apnapaisa.com, a day after the banking regulator Reserve Bank of India cut the repo rate by 0.5 per cent.
The reverse repo ceiling was imposed in March when liquidity in the banking system was tight and the overnight call rate had touched a peak of 80 per cent.
India's real estate market is poised for growth across categories - residential, commercial, and rental. Currently valued at Rs 24 trillion, or about $300 billion, it is projected to surge to $1.3 trillion by 2034, and then grow further to $5.17 trillion by 2047, indicates a report by the Confederation of Real Estate Developers Associations of India (Credai).
The report, however, said it remains watchful of the upside risks to inflation emanating from pass-through of minimum support prices (MSPs), adverse movement in crude oil prices, volatility in global financial markets, lagged impact of the rupee weakness on input prices, adverse implications from fiscal slippage and staggered impact of HRA increases by states and its second-round impact.
Finance Minister P Chidambaram on Tuesday said that the 0.25 per cent hike in repo rates by the Reserve Bank of India
The Securities and Exchange Board of India (Sebi) might relax the disclosure norms around rumour verification to help smooth implementation and ease compliance amid pushback from India Inc, said people in the know. The rule has been notified following amendments to the Listing Obligations and Disclosure Requirements (LODR) by Sebi. However, its implementation has been deferred until February.
'If the majority falls short of expectations, it may prompt initial adjustments in investor sentiment.'
Governor Urjit Patel and his deputies spoke to the media about the central bank's decision to raise the repo rate.
The banking system's liquidity slipped into deficit for the first time in the current financial year (2023-24) due to the imposition of the Incremental Cash Reserve Ratio (I-CRR) for banks and outflows from goods and services tax (GST) payments, according to dealers. Reserve Bank of India (RBI) data shows it injected Rs 23,644 crore on August 21. The last time liquidity was in deficit was on March 27, when the RBI injected Rs 45,575 crore.
In its Third Quarter Review of Monetary Policy 2012-13, the Reserve Bank of India has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent to 7.75 per cent with immediate effect.
This week, bond yields are expected to soften while the rupee could strengthen.
The central bank deputy chief said on Monday that the monetary authorities were unlikely to lower the repo rate from the current five per cent for quite some time.\n\n\n\n
The repo rate, at which RBI lends to the banking system, will be at 7.5%
The contribution from asset management companies (AMCs) has surpassed the Rs 3,000 crore target for the creation of a Rs 33,000 crore backstop facility for debt mutual funds (MFs). The initial corpus for the Corporate Debt Market Development Fund (CDMDF) is nearly Rs 3,100 crore, according to multiple government officials and AMC executives. "The fund is operational now. "The required corpus has been raised by AMCs and the remaining part (Rs 30,000 crore) is in the form of a guarantee from the government which will be activated only in case of a credit event," explained D P Singh, joint CEO and deputy MD, SBI MF.
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