From liquidity, monetary policy operations to financial inclusion, know about RBI monetary policy
With growth rate falling and with inflation continuing to be flat expects a rate cut
Reserve Bank of India Governor Urjit Patel on Saturday exhorted banks to reduce their lending rates to push credit demand in laggard segments, saying banks have benefited from influx of low-cost deposits and its previous repo rate cuts.
The Reserve Bank of India (RBI) on Friday kept the key repo rate unchanged at 4 per cent in view of rising inflation and faint signs of economic growth amid the gradual lifting of coronavirus related countrywide lockdown.
With Deputy Governor Viral Acharya and another member Chetan Ghate voting for a status quo, RBI governor Shaktikanta Das and three others outvoted them for reduction in repo rate to 6.25 per cent from the existing 6.50 per cent.
Retail depositors are earning negative returns on their bank deposits and hence, there is a need for reviewing taxes on interest earned, economists at the country's largest lender SBI have said. If not for all the depositors, the taxation review should be carried out for at least the deposits made by senior citizens who depend on the interest for their daily needs, the economists led by Soumya Kanti Ghosh said in a note, which pegged the overall retail deposits in the system at Rs 102 lakh crore. At present, banks deduct tax at source at the time of crediting interest income of over Rs 40,000 for all the depositors, while for senior citizens the taxes set-in if the income exceeds Rs 50,000 per year.
'When we look at the quality of our retail loan book, the non-performing asset percentage is low.'
With this lending rate reduction, the bank has lowered 40 bps so far this fiscal year in five successive rate cuts beginning April.
The repo rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said while announcing the decisions taken by the central bank's MPC.
After navigating the turbulent pandemic waves, the recovering Indian economy is now sailing through unchartered waters of rising coronavirus cases, spiralling commodity prices and spiking inflation though the lighthouse of sustainable growth remains visible. As 2022 begins, a raft of developments, ranging from Budgetary announcements to continuation of stimulus measures to monetary policy, will set the tone for the domestic economy, which is projected to grow more than 9 per cent in the current fiscal ending March 2022. The country's continuing massive vaccination drive and 'precaution' doses starting for select categories of people this month will provide a firewall against any steep spike in coronavirus cases amid the emergence of the Omicron variant.
Retail inflation inched up to 4.48 per cent in October due to an uptick in food prices, government data showed on Friday. The Consumer Price Index (CPI) based inflation was at 4.35 per cent in September and 7.61 per cent in October 2020.
The move by the central bank follows concerns over tight liquidity conditions and banks' unwillingness to lend to NBFCs.
Armed with necessary macro and micro growth drivers, India is on its way to becoming the fastest growing major economy in the world, a finance ministry report said. Rapid vaccination and teeming festivities will push India's ongoing recovery resulting in narrowing of demand-supply mismatches and greater employment opportunities, as per the monthly Economic Review prepared by the ministry.
CII suggested the policy measures required to ease the tight liquidity situation by cutting CRR by at least 50 basis points.
The Reserve Bank of India (RBI) on Wednesday announced an extension of interim ways and means advances (WMAs) limit of Rs 51,560 crore to state governments till September, to help them tide over the financial stress posed by the second wave of COVID-19. WMAs are temporary advances given by the RBI to the states to tide over any mismatch in receipts and payments. There are two types of WMA - normal and special. While normal WMA are clean advances, special WMA are secured advances provided against the pledge of the government of India dated securities.
...but when they awaken, it's going to be overly optimistic to assume everybody will walk off the sleeping bed and come back to full life, Rajan noted.
Senior bankers are trying to impress upon the central bank that the shift to external benchmark-linked lending be postponed to April 1, 2020.
Das favoured shifting the stance of monetary policy from neutral to accommodative to send a clear signal, indicating that more measures could be taken in the near future to boost growth.
A majority 61.3 per cent of drug users in South Asia are from India and 17 is the average age at which Indians get exposed to alcohol, according to a new United Nations report.
Bankers need to take a call on whether they will allow technology firms to run banks or banks themselves will turn into tech firms, says Tamal Bandyopadhyay.
As COVID-19 infections spike in the country resulting in restrictions in various states and impacting the fragile recovery, many economists are expecting RBI to delay the policy normalisation move, which is expected in the February review. The country has reported a single-day rise of 58,097 new Covid-19 cases as of Wednesday morning--the highest in around 199 days -- of which 2,135 are Omicron cases and later in the day, the first confirmed Omicron-related death has also been reported. Maharashtra recorded the maximum number of 653 Omicron cases followed by Delhi at 464, Kerala 185, Rajasthan 174, Gujarat 154 and Tamil Nadu 121 cases, taking the total tally of cases to 3,50,18,358.
Inflation in food articles during May stood at 1.13 per cent, as against 2.55 per cent in April.
Inflation breached the upper end of the RBI's comfort level of 4 per cent plus-minus two percentage points.
'There will be positive growth, but if you ask me whether we are going to have the original growth rate of 8%, the answer will be, no.'
With retail inflation witnessing significant uptick in May, the Reserve Bank of India (RBI) is likely to maintain status quo in its August monetary policy review, according to a report. According to the SBI's research report- Ecowrap, inflation may remain elevated in the coming months due to several global and domestic factors. "We expect a status-quo in August. We believe RBI would still try to find a marriage of convenience of regulatory and developmental measures and monetary policy in August policy," the research report said on Wednesday.
Subdued prices of food items like vegetables pulled down retail inflation for the third month in a row to 5.3 per cent in August, within the RBI's comfort zone. While the Consumer Price Index (CPI)-based retail inflation declined to 5.3 per cent in August from 6.69 per cent in the same month a year ago, food inflation dipped at a much faster pace to 3.11 per cent from 9.05 per cent in August 2020. The food inflation was also lower than 3.96 per cent in preceding month of July.
'According to CMIE data, employment in manufacturing saw a reduction from 51 million in the country in 2016 to 27 million in 2021. 'That is, it has halved in just 5 years. 'At the same time, the national lockdown resulted in reverse migration to rural areas, and an increase in the number of workers in agriculture. 'It also means joblessness has increased in agriculture because there are too many workers; the number of workers went up from 200 million to 232 million.'
After the bleakness of winter, seeing the first flowers popping their heads out of the ground is always a delight. But there is nothing quite like seeing the bare branches of trees burst into bloom, bending under a heavy load of pretty flowers. And if they are fluffy and pink, even better. Cherry blossom season, usually between the end of March and the first week of April, is a special occasion around the world, made even more special by its short duration.
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Declining prices of food items like vegetables pulled down retail inflation to 5.59 per cent in July, bringing it back within the RBI's comfort zone after two months, official data showed on Thursday. The retail inflation based on the Consumer Price Index (CPI) had remained above 6 per cent during May and June. The government has mandated the RBI to maintain retail inflation at 4 per cent, with a margin of 2 per cent on either side. The CPI based inflation stood at 6.26 per cent in June 2021 and 6.73 per cent in July 2020.
Citing the massive surge in Omicron infections and the resultant impact on overall economic activities in the March quarter, Swiss brokerage UBS Securities has revised downwards its India's growth forecast for the current financial year to 9.1 per cent from 9.5 per cent earlier. However, UBS Securities does not see the third wave impact extending to the next financial year as it has revised upwards its real GDP forecast to 8.2 per cent, up from 7.7 per cent earlier, expecting the real GDP growth to remain well above the historical average. The World Bank pegs it at 8.3 per cent, unchanged from its June assessment, saying the recovery is not broad-based yet.
As FY20 Budget fiscal measures need to be better understood, a reversal of the stance back to neutral will allow MPC flexibility to respond to incoming data.
Under the new Monetary Policy Framework, the central bank aims to contain inflation at 4 per cent with a band of (+/-) 2 per cent.
This is aimed at improving liquidity in all schemes and would help them to meet sudden redemption pressures, said Sebi chairman Ajay Tyagi.
With inflation figures expected to be well within RBI's target, there may be room for further rate cut.
The employment situation remains dire. Whatever can be done to promote greater low-skill employment should be pursued aggressively, advises former chief economic adviser Shankar Acharya.
India's services sector activities eased in March as growth was hit by the detrimental impact of the coronavirus pandemic and input costs remained elevated, a monthly survey said on Wednesday. The seasonally-adjusted India Services Business Activity Index fell from 55.3 in February to 54.6 in March. Though the rates of expansion softened, it indicated growth for the sixth consecutive month. In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction.
Retail inflation slowed to 4.29 per cent in April from 5.52 per cent in March, mainly due to easing food prices, government data showed on Wednesday. The Reserve Bank mainly factors in the retail inflation based on Consumer Price Index (CPI) while arriving at its monetary policy. As per the data released by Ministry of Statistics and Programme Implementation, inflation in the food basket was 2.02 per cent in April, down from 4.87 per cent in the preceding month.
While banks are not as exposed as the corporate sector during the initial stage of the pandemic, the strain on lenders could ultimately be profound. Banks face a second-order hit compared with the corporate and household sectors.
Gaurav Mohta lists three ways to ensure a smooth financial situation for your family despite rising interest rates.
'Are they assuming that by the end of May or the 15th of June, we will see the end of the pandemic?'
