The Reserve Bank of India is likely to take a call on the relaxations sought by HDFC Bank in relation to the merger, as the date of merger draws closer, sources said. The HDFC twins, which announced their decision to merge in April last year, received National Company Law Tribunal's (NCLT's) approval recently - a key milestone to close the deal in due time. The management of both the entities had said that it will take 15-18 months for the merger.
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.
The Reserve Bank of India on Thursday decided to keep policy rate unchanged for third time in a row as it maintains heightened vigil on inflation. The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022.
"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.
When investing in fixed-income products, balancing considerations like safety, liquidity, and income is essential.
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.
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.
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.
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.
Reserve Bank is scheduled to announce its bi-monthly monetary policy on August 3.
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.
'This is an area where good lending can happen, and that is one of the priorities for the next quarter.'
The Monetary policy committe comprising 6 members voted 6-0 in the favour of the rate cut.
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.
State Bank of India (SBI), India's largest lender, is looking to raise Rs 10,000 crore through 15-year infrastructure bonds as early as next week, said multiple sources aware of the development. Market participants expect a coupon in the range of 7.15-7.18 per cent for SBI's upcoming infrastructure bond issuance. This comes as demand for longer-tenor papers has remained strong in recent domestic capital market offerings.
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.
Reserve Bank of India (RBI) Governor Sanjay Malhotra said the repo rate cut in the February meeting of the monetary policy committee (MPC) was due to inflation aligning with the target and recognising the fact that monetary policy is forward-looking.
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 cut in the policy rate by RBI will help lower interest rates
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.
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.
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.
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.
They feel reducing policy rates will help to boost production and revive the economy.
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.
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.
The additional measures to check exchange rate volatility comes within 10 days of RBI taking stern steps to suck out liquidity from the system.
A day after RBI deputy governor's comment, Chaudhuri says his idea on cash reserve ratio was meant to ignite public debate
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.
The Reserve Bank of India has kept all key interest rates unchanged in its mid-term credit policy review announced on Monday.
CRR to remain unchanged at 4.00 pc this fiscal
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.
The Reserve Bank of India (RBI) clarification on the final norms for new bank licences has much to mull on for the many entities interested. It has clearly ruled out any benefit to the new entrants in terms of more time to meet the cash reserve ratio/statutory liquidity ratio (CRR/SLR) requirements.
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