'Any normalisation exercise will bring its share of volatility.'
RBI's previous monetary policy was announced on September 29.
Rajan announced a status-quo on interest rates.
Highlights of the RBI monetary policy.
The Reserve bank of India has kept the repo rate and reverse repo rates unchanged in its mid-quarter review of monetary policy announced on Thursday.
The rate of interest at which the Reserve Bank of India (RBI) lends money to other banks is called repo rate. At present, it stands at 6.75 per cent.
The NSE Nifty, after shuttling between 10,331.80 and 10,227.45, finally settled 196.75 points, or 1.94 points higher at 10,325.15.
The wider NSE Nifty too ended 21.55 points, or 0.21 per cent down at 10,476.70.
In its Fifth Bi-monthly Monetary Policy Statement, 2017-18, RBI said the second quarter growth was lower than the one that was projected in the October review, and the recent increase in oil prices may have a negative impact on margins of firms and Gross Value Added (GVA) growth.
There's only a slim chance of a substantial drop.
What is killing the risk appetite of the bond buyers is the inconsistency in the central bank's approach. It needs to allow the yield to find its own level, gradually. To ensure that, the RBI may adopt a similar approach with which it handles a slipping rupee, asserts Tamal Bandyopadhyay.
Weakness in the rupee against the US dollar also weighed on domestic stocks. The local unit fell 11 paise to 70.60 against the US dollar intra-day.
Two members recommended bringing down the rate by 50 bps in the April policy.
Das said banks have passed only 0.29 per cent in rate cuts to their borrowers as against 0.75 per cent cuts in interest rates by the Reserve Bank till June.
The Reserve Bank remains laser-focused to bring back retail inflation to 4 per cent over a period of time in a non-disruptive manner, Governor Shaktikanta Das stressed while voting for status quo in interest rates, as per minutes of the October policy meeting released on Friday. The central bank has been mandated by the government to ensure the Consumer Price Index (CPI) based inflation is at 4 per cent, with a band of 2 per cent on either side. The retail inflation, which was above 6 per cent during May and June, has started moving down and stood at 4.35 per cent in September.
Avoid long-term debt funds for the next couple of months and track the direction of interest rates till October.
A CRR cut will help banks to reduce lending rates.
The new effective repo rate for the third quarter is now fixed at 7.25 per cent while CRR rate has revised to 4 per cent.
The big test will come at the end of March when the fiscal year ends and banks tend to hold on to cash.
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Industry's demand for a reduction in the repo rate, currently 8 per cent, has gained momentum after wholesale and retail inflation eased in February.
Experts say this is a good time to buy a house for self-use, points out Sanjay Kumar Singh.
Inflation target remains 5% for January 2017.
At least a 25 basis points hike can be expected on the October 5 policy
All-out efforts are needed to mitigate the adverse impact of the Covid-19 pandemic, and the RBI will use any instrument necessary to revive growth and preserve financial stability, according to the minutes of the central bank's policy meeting.
Follow these tips to get ready to celebrate with sweets and kites with your friends and family in your new house next Pongal.
RBI said at the current juncture, the all-out effort is to maintain and sustain, with the hope that when life is secure, resources, energy and time can be marshalled to rebuild and revive.
As per the data released by the NSO, the overall food inflation rose to 14.12 per cent in December as against (-) 2.65 per cent in the same month of 2018.
Debt funds typically held 0-5 per cent of their portfolio in cash and cash equivalents before this Sebi diktat.
Analysts expect RBI to restore 100-bp corridor in Tuesday's policy review.
The central bank had nudged banks to cut lending rates.
Rediff.com interviewed people from several walks of life to know their opinions on the rise in rates by RBI.
None of the four benchmarks suggested by the RBI is ideal as banks in India create loan assets from their deposits and not borrowing from the regulator or market, says Tamal Bandyopadhyay.
Analysts at Barclays pitched for a 0.25 per cent cut to generate demand advising the central bank to throw caution to the wind.
The S&P BSE Midcap and the S&P BSE Smallcap indices added 0.5% and 0.7%, respectively
The central bank might raise repo and reverse repo rates by 25 basis points each, they said. Still, RBI action would be conditional on its ensuring sufficient liquidity in the banking system.
The RBI has this year cut interest rates by 110 basis points in four instalments but banks have passed only a part of it to borrowers. Before the last reduction earlier this month of 35 basis points, the bank on an average had passed only 29 basis points out of 75 basis points cut affected during 2019.
Should deposit growth continue to outpace credit growth, banks may end up ceding some hard-earned 25-50 bps improvement in profitability or net interest margin gained in the past two years.
The career bureaucrat-turned-central banker walked into the 19th floor corner room of the Reserve Bank on December 12, 2018. Since February 2019, the Das-led RBI has cut the repo rate by a whopping 135 basis points to support the sagging growth, including an unprecedented 35 bps reduction in August. As he completes one year at the helm, woes in the NBFC sector, overall health of the banking sector and steeply falling economic growth are among the major challenges that needs to be tackled sooner than later.
Rajan said the central bank has used up all its "space available" to cut interest rates
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