Some see CRR cut as tight liquidity continues.
The MSS limit has been raised from Rs 1,50,000 crore (Rs 1,500 billion) in the current financial year. This is the fourth time the government has raised the limit.
Financial services firm AnandRathi analysed the key points of the policy soon after it was announced.
Battling a sharp surge in inflation, the Reserve Bank is all for a smooth monetary policy response and the desire to have smaller hikes led it to tighten the policy in an off-schedule meet, a source said on Thursday. Inflation has been massively impacted by Russia's invasion of Ukraine and will in due course also reflect the dent caused by Indonesia banning palm oil exports, the source aware of central bank thinking said, indicating that there was no other option but to respond. "The idea is to have a smooth policy response, not to put in large cold turkey responses," the source said, making it clear that the preference is for smaller magnitude responses and not larger ones.
CRR stand at 5.5 per cent after a 50 basis points cut in January.
The RBI, had, earlier in the day, hiked CRR by 0.75 per cent in two tranches, a move, it said, would help flush-out Rs 36,000 crore (Rs 360 billion) from the system.
The NSE Nifty slumped to a low of 4,833, and finally settled with a heavy loss of 155 points at 4,853. The index has shed 422 points (8%) in the last six day. The market breadth too was extremely bearish, with nearly eight stocks for each advancing stock. Out of 2,944 stocks traded, 2,582 declined and 337 advanced on Wednesday.
The transmission of the last cash reserve ratio cut has also not happened fully because that came in March.
On July 15, the Reserve Bank put in place measures to restore stability in the foreign exchange market, including raising the Marginal Standing Facility and bank rates to 10.25 per cent and restricting access by way of repos to Rs 75,000 crore (Rs 750 billion).
Leading industry and export chambers like PHDCCI and Federation of Indian Export Organisation on Tuesday demanded 1.0 per cent cut in bank rate and cheaper export finance in Reserve Bank of India's' forthcoming busy season credit policy.
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.
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.
Wholesale price-based inflation spiked to a record high of 15.08 per cent in April on rising prices across segments from food to commodities. The WPI-based inflation was 14.55 per cent in March and 10.74 per cent in April last year. "The high rate of inflation in April 2022 was primarily due to rise in prices of mineral oils, basic metals, crude petroleum & natural gas, food articles, non-food articles, food products and chemicals & chemical products etc. as compared to the corresponding month of the previous year," the commerce and industry ministry said in a statement.
The Reserve bank of India has just increased its repo rate and CRR and there are chances that banks may soon increase the interest rates on home loans.
A CRR cut will help banks to reduce lending rates.
Our financial system, by any reckoning, is fragile, which is why the RBI is intervening.
The main culprit is the lack of transparency that your lending bank of housing finance institute employs in determining home loan rates.
The rate cuts are expected to infuse Rs 80,000 crore into the banking system.
The recent hike in the rates will hurt your finances further. Time to do some stock-taking.
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.
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.
HDFC chairman Deepak Parekh on Monday said harmonisation of rules between banks and non-banks which reduces the regulatory arbitrage was one of the key factors which influenced the decision for merger between the largest home financier and HDFC Bank. Parekh, who said the merger discussions have happened over the last three weeks, noted that requirements like non performing asset recognition being at par and size-based regulations for non-bank finance companies are among the changes in landscape. Addressing a press conference after the surprise announcement earlier in the day, Parekh said the last three years have seen harmonisation in the regulations which reduce the "regulatory arbitrage" of running a separate home finance company.
The RBI has announced its credit policy last week and auto financiers believe that consumers should 'wait and watch' before the interest rates on auto loans settle down.
Bankers on Tuesday ruled out any immediate reduction in lending rates, saying any step in that direction will be determined by the cost of funds.
The Reserve Bank of India, which has already raised the cash reserve ratio (CRR) thrice since December last year, is contemplating another hike, though only on incremental deposits this time.
Referring to the proposed new monetary policy framework, it said in the weeks ahead, government and RBI will work towards it.
The chances of a rate cut in September have risen.
Since the burden of 'reserve' tax has fallen primarily on SMEs as they depend on bank finance, a further hike in its Cash Reserve Ratio will definitely hit the SMEs and small savers.
The following are the highlights of the mid-term review of Monetary and Credit Policy for the year 2003-04.
This is the first official data on inflation after RBI announced its mid-term monetary review in which it raised cash reserve ratio by 50 basis points to suck out excess liquidity. While retaining its forecast for inflation at five per cent this fiscal, RBI lowered its objective for the medium-term to three per cent against 4-4.5 per cent as announced in the last quarterly review in July.
If India sustains long-term growth, you could make good money off the stock market.
The gains will be gradual as the measure will be executed over 12 months or so.
Ahead of its annual monetary policy scheduled next month, the RBI in a sudden move hiked the repo rate and Cash Reserve Ratio** to 7.75 per cent and 6.5 per cent, respectively to suck out about Rs 19,500 crore (Rs 195 billion0 from the system.
Inflation target remains 5% for January 2017.
BofA-ML said the liquidity deficit is running higher than the forecasts because the RBI has suspended its bond buybacks or open market operations.
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Steps announced by new RBI Governor Raghuram Rajan could attract $10 billion of forex inflows in the next three months and this could be a material near-term positive for the rupee, which has lost 20 per cent since January, the London-based banking and financial services company said.
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