Next bi-monthly policy statement on September 30.
Highlights of RBI's third quarter review of monetary policy.
The central bank kept cash reserve ratio unchanged at 4 per cent.
In view of the rising number of mobile and internet banking users, the Reserve Bank of India (RBI) has proposed to tighten norms related to the liquidity coverage ratio (LCR) by increasing the run-off factor for retail deposits. "Banking has undergone rapid transformation in recent years. "While increased usage of technology has facilitated the ability to make instantaneous bank transfers and withdrawals, it has also led to a concomitant increase in risks, requiring proactive management," the RBI said in the draft guidelines released on Thursday.
Showing concerns over hardening inflation, the Reserve Bank today left the key interest rate unchanged but reduced cash reserve ratio by 0.25 per cent to inject Rs 17,500 crore (Rs 175 billion) liquidity into the financial system.
Benchmark policy rate unchanged at 6.75 per cent.
"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.
RBI is also considering a proposal to re-introduce inflation-indexed bonds.
After the Reserve Bank unveiled the third quarterly review of the monetary policy, several bankers said that they may not go in for rate cut immediately.
The Reserve Bank has decided to keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of their net demand and time liabilities and keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.25 per cent.
Moreover, the RBI's use of reserve ratios, statutory liquidity ratio and cash reserve ratio as monetary policy tools affected banks' profitability: No interest is paid on CRR balances, and the interest yield on SLR securities is far lower than the yields on advances.
Weighed down by a weak rupee, the Reserve Bank on Tuesday chose to keep all key interest rates unchanged and asked the government to take urgent steps to reign in the high current account deficit.
When banks deposit their money with RBI, the central bank offers government securities of equal value. But now, it could be running out of enough securities to offer banks against the overnight deposits.
The Reserve Bank might hike the Cash Reserve Ratio (statutory cash balances banks maintain with the apex bank) by 0.50% in its credit policy if inflation remains high, feel Indian bankers. The RBI is scheduled to announce annual credit policy for fiscal 2008-09 on April 29. RBI is likely to tighten money supply in its forthcoming annual credit policy to suck out excess liquidity from the system. Growth has moderated in recent months.
Reserve Bank is scheduled to announce its bi-monthly monetary policy on August 3.
The Monetary policy committe comprising 6 members voted 6-0 in the favour of the rate cut.
In a mixed bag for HDFC Bank ahead of the parent HDFC's merger with itself, the Reserve Bank of India has declined to make exceptions on certain aspects, and has offered some leeway on others. The country's largest private sector lender, which is aiming to conclude the merger with the home finance major by July, had written to the central bank seeking certain forbearances after announcing the $40-billion merger in April last year. In an exchange filing this evening, HDFC Bank said it received a response from RBI on Thursday and also said that there are a few pending issues.
At a time when headline inflation has been moderating, most were expecting the central bank to take a firmer stance on growth.
RBI has cut policy rate thrice during 2015.
The possibility of key policy rate cut is not bright as industrial output grew by 6.8 per cent in January against just 2.5 per cent in the previous month.
The banking system liquidity bounced back to surplus mode after three weeks, the Reserve Bank of India (RBI) data showed. This was due to government spending, according to dealers. The liquidity situation could further ease with the disbursement of the last tranche of incremental cash reserve ratio (I-CRR) worth Rs 50,000 crore on Saturday.
Of the 52 economists polled, 50 expect the policy repo rate to remain at 7.25 per cent, and 47 of 48 respondents see the cash reserve ratio, or the portion of deposits banks have to maintain with the central bank, unchanged at 4 per cent.
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 Reserve Bank Officers Cooperative Credit Society, which caters to the credit needs of RBI officers posted all over India, has a fixed deposit of Rs 105 crore in the bank on which the RBI has placed various curbs for six months following revelations of irregularities.
Similarly, 51 per cent of 105 market participants polled by RBS said they do not expect a CRR cut in the quarterly policy announcement next Tuesday.
They feel reducing policy rates will help to boost production and revive the economy.
The cut in the policy rate by RBI will help lower interest rates
Reserve Bank on Tuesday kept the bank rate and CRR unchanged, but hiked repo and reverse repo rate by 0.25 per cent to 5.5 per cent and 6.5 per cent respectively as part of measures to rein in inflation.
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.
Bank lending has seen a significant fall. RBI needs to bring liquidity into the system immediately.
A day after RBI deputy governor's comment, Chaudhuri says his idea on cash reserve ratio was meant to ignite public debate
The additional measures to check exchange rate volatility comes within 10 days of RBI taking stern steps to suck out liquidity from the system.
RBI's exercise will take into account standards of governance, the viability of the payment bank (PB) business model, and changes, if any, if needed.
These are the highlights of the seventh bi-monthly monetary policy statement for 2019-20 by the RBI amid COVID-19 pandemic:
The banking system neared Rs 1.47 trillion of liquidity deficit on Monday, the highest since January 29, 2020, when the banking system liquidity deficit went up to Rs 3 trillion. The Reserve Bank of India (RBI) injected Rs 1.47 trillion on Monday and Rs 1.46 trillion on Tuesday. Market participants say that the disbursement of Rs 25,000 crore as the second tranche of incremental cash reserve ratio (I-CRR) will not be enough, and the liquidity might tighten further to Rs 2 trillion in short term due to tax outflows and arrival of the festival season.
The Reserve Bank of India has kept all key interest rates unchanged in its mid-term credit policy review announced on Monday.
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.
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.
ICICI Bank Chairman K V Kamath on Thursday disagreed with the suggestion of SBI chief Pratip Chaudhuri that RBI should scrap CRR, saying it is part of the monetary policy and no issue can be made of it.
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