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.
Reserve Bank of India Governor D Subbarao on Friday increased mandatory cash reserve of banks held by RI by 75 basis points (0.75 per cent) in a bid to suck excess liquidity to combat rising inflation.
Rajan will evolve a policy with the help of professional persons for a national consensus if we have to carry on with implementing social and economic changes in a complex economy.
High deposit rates may put pressure on teaser home loan rates
The Reserve Bank of India (RBI) on Monday said that the timing and sequence of exit from an easy monetary policy were still a challenge.
Prime Minister Manmohan Singh today reviewed measures taken by the government to ease the liquidity crunch faced by India Inc arising out of the global financial crisis as well as discussed possible measures to help Indian exporters tide over the downturn in key markets like the US and Europe.
The RBI in its monetary policy review in October has revised the inflation forecast to 6.5 per cent by March-end from 5 per cent earlier.
Subbarao pointed out that the non-banking financial companies could also play a significant role in deepening the process of financial inclusion. NBFCs can reach out where banks cannot, he added.
Financial Services Secretary Arun Ramanathan has been appointed as the Finance Secretary. "The Appointments Committee of the Cabinet has approved the appointment of Arun Ramanathan as Finance Secretary," an official statement said on Tuesday.
The Reserve Bank of India on Wednesday said banks' response to monetary actions in terms of cutting interest rates have been mute and there is room for further softening of interest rates.
Banks can lend credit to telecom companies as part of this process.
Former Reserve Bank Governors do not seen any harm in central bank consulting the government before firming up monetary policy initiatives saying such an step would not amount to infringement on its independence.
After attending a meeting in Mumbai with RBI's top brass headed by Governor D Subbarao, Harsha Pati Singhania, president, FICCI, said the real rate of interest remained in double digits despite inflation having declined sharply. "Given the present interest rate structure and the inflation rate, real rate of interest is still in double-digits. With the near-zero rate of inflation, the real and nominal rates of interest are almost at the same level," said another industrialist.
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.
The Reserve Bank of India's governor said On Thursday that there is a cost to any further fiscal stimulus package as it would put pressure on credit markets. However, RBI Governor Duvvuri Subbarao did not elaborate further on what this additional cost would be.
This failure of basic short-term policy is surprising, given the star power that this government brings to its economic management.
'We get to know secrets such as some of India's top-rated firms do not always make payments when due and many State-owned, listed, enterprises that borrow in bond markets default regularly.' 'Without naming the bank, he says that ever-greening of poor loans by a part of India's shadow banking lay at the doorstep of India's banking, notably 'one private bank'.' Viral Acharya's Quest for Restoring Financial Stability in India won't be music to many ears, observes Tamal Bandyopadhyay.
Faced with the challenging task of balancing growth and inflation, the Reserve Bank of India will take measures in its quarterly review later this month to perk up the economy and to control inflation, which rose to 0.83 per cent for the third week of September.
The RBI left key policy rates unchanged and cut the GDP growth estimate for this fiscal to 5.5 per cent from 5.7 per cent.
Bankers are likely to urge the Reserve Bank not to hike its key-rates and mandatory cash requirement in its April-policy, as they fear that this would affect their liquidity, resulting in a sharp surge in lending rates.
In an attempt to mitigate the problems faced by the beleaguered diamond industry in Gujarat, the Reserve Bank of India has decided to set up a task force comprising representatives of the state government, the State Level Banking Committee Convener and other bankers.The task force will submit its report by the month-end. Gujarat's diamond industry has been beset with problems, chief among them being lacklustre Christmas-season demand for finished diamonds.
Economists say RBI to raise policy rates in annual policy statement in April.
The Reserve Bank of India on Friday said it will come out with its annual monetary policy for the next fiscal on April 20, amid expectations that the central bank will hike interest rates to tame the rising inflation
RBI had made available a potential liquidity of Rs 5.60 lakh crore (Rs 5.6 trillion), nearly 9 per cent of gross domestic product, to help the country tide over the liquidity crisis following the global financial meltdown triggered by the collapse of America's iconic investment banker Lehman Brothers in mid-September.
The meeting comes ahead of a fresh stimulus package aimed at sectors not covered in the earlier measures announced by the central bank and the government.
With inflation turning negative, industry has been demanding interest rate cuts to propel demand. However, RBI Governor D Subbarao had said there is no threat of deflation as food and crude oil prices are still firm.
The finance minister said Prime Minister Manmohan Singh on Tuesday reviewed the financial situation with particular reference to the liquidity position at a meeting with the RBI Governor, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia and senior officials of the ministry.
The NSE Nifty closes at 5,134, up 22 points. Global markets are trading mixed; European markets are marginally in the green while the US index futures are flat.
Data released on Thursday showed prices of essential commodities like cereals went up by 12.7 per cent, rice by 11.75 per cent, wheat 12.6 per cent and pulses rose by 42 per cent.
Except for the change in the inset letter, the design of these notes to be issued now is similar in all respects to the banknotes in Mahatma Gandhi Series -- 2005, with additional or new security features issued on October 21,2005.
The Reserve Bank is in touch with various banks to understand why lending rates are not coming down despite the central bank cutting policy rates, even as the bankers expressed inability to lower the rates when bond yields remain high.
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.
Reserve Bank Governor D Subbaro on Tuesday said there is scope for banks to lower lending rates further, but most top bankers maintained that interest rates will remain the same in the near term and could even rise after 3-4 months.
The rate cuts are expected to infuse Rs 80,000 crore into the banking system.
The RBI Governor says he does not have a specific foreign exchange rate target, which raises concerns that the central bank is unlikely to defend any particular level strongly.
Reserve Bank of India Governor D Subbarao describes his first 50 days on Mint Road as 'tough'. He spoke to Business Standard after his first monetary policy statement.
The RBI's assessment of the economy, presented as a prelude to the policy announcement, was relatively downbeat. Conceding the persistence of a hostile global environment and domestic weakness, the RBI expects GDP growth during 2009-10 to be 6 per cent. This is slightly higher than the 5.7 per cent that reflects the median of its external forecasters' survey.
RBI Governor D Subbarao aims to revive growth by increasing the flow of credit through reduction in policy rates. By reducing the repo rate by another 25 basis points, he is hinting at a further reduction in interest rates. And, through the 25 bps cut in reverse repo rate, he is trying to make it less remunerative for banks to park surplus liquidity with the central bank and instead prodding them to lend more to the productive sectors.
In the light of credit offtake not picking up despite ample liquidity in the system, the RBI is likely to keep policy rates unchanged in its annual monetary policy, to be unveiled on Tuesday, but may impress upon banks to step up lending to sectors slowing down.
The wholesale price index, coming below four per cent, may prompt the Reserve Bank of India to cut key policy rates. An indication was made by the RBI Governor D Subbarao in Tokyo on Wednesday. During the week, prices of manufactured items such as sugar, imported edible oil and textile items such as cotton yarn got cheaper.
