Days ahead of the annual monetary policy, trade bodies today urged the Reserve Bank not to hike its key-rates as they fear a further tightening could push lending rates up and thus hamper growth.
NBFCs seek level playing field with banks in terms of treatment of NPAs, TDS on deposits, removal of service tax on HP and lease transactions, refinance mechanism akin to NHB etc
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.
Since the start of the year, the RBI has had to contend with rising inflation and increased liquidity in the financial system causing it to raise CRR and repo rate to reign in the excess money.
A massive liquidity outflow of over Rs 40,000 crore (Rs 400 billion) in the coming weeks is expected to pull back the overnight call rates from the near sub-zero levels to the central bank-desired 6-7.75 per cent range.
Real estate companies' borrowing costs have moved up by a third in the last one and a half years, from 11.5-12 per cent to 16 per cent now.
RBI expected to draw comfort from stable core inflation.
If RBI slashes its borrowing rate, banks lend at a lower rate. Also, deposit rates go down.
RBI on Tuesday slashed short-term lending rate by 0.25 per cent to 7.5 per cent, which the bankers read as not enough for an immediate cut in their lending rates.
With the government proposing to give flexibility to the Reserve Bank of India in fixing prudential limits, bankers expect a cut in statutory liquidity ratio
Foreign institutional investors pumped in nearly $167.35 million (Rs 899.83 crore) into the local stock markets on Tuesday, according to the BSE provisional data.
India Inc's reactions to the RBI rate cut.
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.
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.
Some see CRR cut as tight liquidity continues.
At a time when headline inflation has been moderating, most were expecting the central bank to take a firmer stance on growth.
At present, CRR, the portion of deposits which commercial banks keep with the central bank, stands at 6 per cent.
The Reserve Bank of India Deputy Governor Rakesh Mohan on Thursday said the cash tightness in the banking system was temporary
Explaining the rationale behind the regulatory mandate, the deputy governor, who looks after banking supervision, apart from a host of other departments at the central bank, said the CRR is charged on banks because only they can create money.
Five of the six external members had suggested that the central bank should reduce the policy rate.
Consequently, the reverse repo rate under the LAF will remain unchanged at 7.5 per cent and the marginal standing facility (MSF) rate at 9.5 per cent.
Reserve Bank's recent policy stance has earned for it praise as well as brickbats.
Bank lending has seen a significant fall. RBI needs to bring liquidity into the system immediately.
After all, India is the only one among the BRIC nations (Brazil, Russia, India and China) where lending rates are still ruling at their 2008 peaks.
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%.
RBI has held its short-term lending (repo) rates unchanged at eight per cent since April 2012.
The central bank raised statutory liquidity ratio, the portion of deposits that banks are required to keep in government securities, by 100 basis points to 25 per cent. Other key rates were unchanged.
With credit demand picking up and liquidity crunch yet to ease, bankers are expecting a cut in key policy ratio - Cash Reserve Ratio (CRR) - by one per cent in the mid-term monetary policy review by RBI, a top bank official said.
RBI expects more from the government than last week's very limited package of reforms and fiscal measures.
At the Interbank Foreign Exchange (Forex) market, the rupee resumed sharply higher at 53.80 a dollar compared to last Friday's close of 54.30.
Last year SBI's credit growth was 15.6 per cent.
Reserve Bank of India Governor D Subbarao surely knows how to crack a joke even on as mundane a topic as the cash reserve ratio (CRR).
A day after RBI deputy governor's comment, Chaudhuri says his idea on cash reserve ratio was meant to ignite public debate
In view of high inflation and deficient monsoon rainfall, the Reserve Bank may find it difficult to cut the key lending rate to boost the economy as is being demanded by the industry.
Reserve Bank Governor D Subbarao will, however, not touch the policy rate or the repo, rate at which RBI lends to banks, on October 30 when he unveils the half-yearly monetary policy because headline inflation continues to be elevated at 7-7.5 per cent, the agency said.
Growing concerns over slower-than-expected margin recovery, amid weak deposit growth have caught HDFC Bank's investors off guard. HDFC Bank's stock on Wednesday plunged nearly 9 per cent to hit an intraday low of Rs 1,527 on the BSE after reporting weaker-than-expected earnings in the third quarter (October - December) of the current financial year (Q3FY24). The shares of India's biggest private lender closed at Rs 1,536.9, down 8.46 per cent.
With the slack season credit policy due to be announced on April 28, bankers are waiting to see how the Reserve Bank of India reacts to the budgetary proposals on freeing caps on statutory liquidity ratio and cash reserve ratio.
The transmission of the last cash reserve ratio cut has also not happened fully because that came in March.
Last month, RBI slashed cash reserve ratio -- the percentage of deposits that banks have to keep with the RBI -- from 5.5 per cent to 4.75 per cent. With this, the central bank had infused Rs 48,000 crore (Rs 480 billion) into the economy.
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