Short-term lending (Repo) rate is unchanged at 8 per cent.
Experts say the central bank will refrain from using the CRR as a liquidity tool, as a reduction in the rate will go against its current anti-inflationary stance.
CRR stand at 5.5 per cent after a 50 basis points cut in January.
The currency in circulation (CIC) declined by Rs 7,600 crore in the Diwali week, making it the first such happening in two decades, a report said on Thursday. This was made possible courtesy of a greater reliance on digital payments by people, the report by economists at SBI said, adding that the Indian economy is undergoing a structural transformation at present. They clarified that the Diwali week in 2009 had also witnessed a marginal Rs 950 crore decline in currency in circulation, but that was purely due to the economic slowdown amid the global financial crisis.
The Reserve Bank on Friday upped the cash reserve ratio from 5 per cent to 5.75 per cent, a move expected to flush-out Rs 36,000-crore (Rs 360-billion) from the system.
RBI Governor Duvvuri Subbarao on Tuesday defended the bank's decision to keep the key policy rate unchanged saying inflation could rise to above 8 per cent in the near-term.
RBI had last week announced a 0.5 per cent increase in cash reserve ratio to 5.5 per cent in two phases to absorb excess liquidity from the economy and check rising prices.
Banks have asked for an exemption of statutory requirements such as the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) for lending to the infrastructure sector. While the CRR is a tool where banks have to set aside liquidity with RBI in proportion of the deposits mobilised by them, the SLR requires banks to invest 25 per cent of their liabilities in government securities to generate instant liquidity.
The Reserve Bank on Monday said asset quality of banks improved further and their gross non-performing assets (GNPA) or bad loans ratio declined to a 12-year low of 2.6 per cent in September 2024 on the back of falling slippages and steady credit demand. The RBI also flagged concern over a sharp rise in write-offs, especially among private sector banks (PVBs), which could be partly masking worsening asset quality in unsecured lending segment and dilution in underwriting standards.
He said despite liquidity injection by RBI, borrowers should not expect reduction in interest rates for short- and medium-term loans. He, however, added that the measures announced by the government and RBI have starting yielding results.
The Reserve Bank of India has launched an assault on inflation by increasing the cash reserve ratio (CRR) 75 basis points to 5.75 per cent. While sounding upbeat on economic growth, the central bank has kept the door open for an increase in interest rates even before the annual policy statement in April.
IT majors and Maruti Suzuki down 8% were the top losers among Sensex-30.
From the Sensex pack, IndusInd Bank, NTPC, Asian Paints, Hindustan Unilever, JSW Steel, Tech Mahindra, Bajaj Finance, Infosys, Wipro, ICICI Bank, Bajaj Finserv, HDFC Bank and Tata Motors were among the major laggards. HCL Technologies, Power Grid, Titan, Reliance Industries, UltraTech Cement, Tata Steel, State Bank of India and Mahindra & Mahindra were the gainers.
"You may probably see some more liquidity controls like the CRR being altered again...if oil prices go beyond tolerable levels..," J&K Bank's Chairman and Chief Executive Officer, Haseeb A Drabu, told reporters on the sidelines of a seminar in Mumbai.
The RBI is likely to raise CRR, the portion of funds that banks have to keep with the regulator, by 50 basis points in its forthcoming monetary review next week and signal tight monetary measures, says Moody's.
The goverment has found serious irregularities in the functioning of the National Bank for Agriculture and Rural Development (Nabard), Finance Minister Jaswant Singh said in the Rajya Sabha Tuesday.
In the mid-year monetary policy review on Tuesday, RBI, left the key interest rate unchanged but reduced cash reserve ratio by 0.25 per cent to infuse additional liquidity of up to Rs 17,500 crore (Rs 175 billion) into the system.
Former Reserve Bank Deputy Governor S S Tarapore on Thursday said that the apex bank should not lower its repo and cash reserve ratio rates in its forthcoming monetary policy review.
The Reserve Bank of India's (RBI's) decision to withdraw the incremental cash reserve ratio (I-CRR) is expected to benefit banks during the festival season. They are likely to increase deposit rates by up to 25 basis points (bps) in select maturity buckets. The rise in demand for funds to cover tax payments and meet quarter-end business targets could influence rate decisions by banks, according to bankers and money market executives.
The main culprit is the lack of transparency that your lending bank of housing finance institute employs in determining home loan rates.
The country's largest public sector lender State Bank of India on Thursday said that it does not expect the interest rates to go up in the short term.
Hike in CRR to suck out Rs 12,500 crore from the banking system.
The Reserve Bank on Friday eased money supply further by cutting key policy rates and ratios - decisions that would among other things infuse Rs 20,000 crore (Rs 200 billion) into the banking system.
In its quarterly monetary policy review, RBI had last month retained the CRR at 4.75 per cent and reduced the statutory liquidity ratio -- the amount of deposits banks park in government bonds -- by 1 per cent to 23 per cent, effective August 11.
The government is likely to announce early next week a series of measures to boost economic activity in the country.
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.
The rate cuts are expected to infuse Rs 80,000 crore into the banking system.
In January, the RBI hiked its cash reserve ratio or the amount banks keep with the central bank by 0.75 per cent to 5.75 per cent.
Led by an unprecedented boom in domestic consumption, the country achieved an average GDP growth of 8.6 per cent over the past three years. For 2006-07, growth is forecast at 9.2 per cent, the fastest in 18 years.
According to Corporation Bank executive director Asit Pal, there would not be any change in prime lending rate as there is sufficient liquidity in the system and credit offtake is also muted at this point of time.
Inflation is likely to peak at 8.7 per cent by end-March and the Reserve Bank is likely to begin tightening its monetary policy from its January policy review itself, a report by Bank of America Merrill Lynch (BofAML) has said.
The central bank may hike CRR by 50 bps; some economists expect a rise in policy rates too.
The recent hike in the rates will hurt your finances further. Time to do some stock-taking.
Reserve Bank of India said on Thursday it is looking at liquidity, inflation and credit growth to see if it will have to take more steps to tighten monetary conditions.
A day after the Reserve Bank of India (RBI) raised the benchmark repo rate and cash reserve ratio (CRR), leading property developers said they are mulling hiking prices of apartments and focusing on the affordable housing segment to counter the impact of a high interest rate regime.
In addition, bankers also told Business Standard that they did not expect the central bank to hike policy rates or the cash reserve ratio in the third quarter review scheduled for October 27 as inflation was not rising fast though inflationary expectations were there.
As if any proof was needed, the spate of Cash Reserve Ratio hikes clearly underlines the Reserve Bank of India's intention to clamp down on inflation before the situation deteriorates any further.
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