The RBI has changed the way it approached supervision in the past. Having seen a couple of collapses in the NBFC sector and the near-collapse of a few banks, it is focusing on regular drills to prevent a fire from breaking out, explains Tamal Bandyopadhyay.
The government bond yield curve is likely to flatten in the financial year 2027 (FY27) as the Reserve Bank of India (RBI) is expected to ease supply pressure in the ultra-long segment. In FY26 so far, reduced investments by insurance companies and pension funds pushed up yields on ultra-long tenor securities, steepening the curve.
RBI expected to draw comfort from stable core inflation.
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 Reserve Bank of India has left bank rate and cash reserve ratio unchanged at 6 per cent and 4.5 per cent, respectively.
Short-term lending (Repo) rate is unchanged at 8 per cent.
Reserve Bank's recent policy stance has earned for it praise as well as brickbats.
MSS bonds are issued with the objective of providing the central bank with a stock of securities with which it can intervene in the market for managing liquidity. These securities are not issued to meet the government's expenditure.
Five of the six external members had suggested that the central bank should reduce the policy rate.
If RBI slashes its borrowing rate, banks lend at a lower rate. Also, deposit rates go down.
Last month, RBI slashed cash reserve ratio -- the percentage of deposits that banks have to keep with the RBI -- from 5.5 per cent to 4.75 per cent. With this, the central bank had infused Rs 48,000 crore (Rs 480 billion) into the economy.
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.
The RBI has, however, left the cash reserve ratio or bank rate, which is the amount of cash that banks have to park with the central bank to maintain prudential norms, unchanged at 6 per cent.
At present, CRR, the portion of deposits which commercial banks keep with the central bank, stands at 6 per cent.
RBI has held its short-term lending (repo) rates unchanged at eight per cent since April 2012.
The Reserve Bank will present the mid-quarter Monetary Policy Review on Tuesday.
To ease the potential liquidity stress, the Reserve Bank on Friday slashed Cash Reserve Ratio (CRR) by 50 basis points to 4 per cent, a move that would unlock Rs 1.16 lakh crore bank funds. The RBI on May 4, 2022 had raised CRR to 4.5 per cent from 4 per cent in an off-cycle Monetary Policy Committee (MPC) meeting, with effect from May 21 the same year.
To ease liquidity situation, the Reserve Bank today slashed CRR -- the portion of deposits banks are required to keep with the central bank -- by 0.75 percentage points, a step that will infuse Rs 48,000 crore (Rs 480 billion) into the economy.
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.
The Bank Rate (6%), Repo Rate (7.75%) and Reverse Repo Rate (6%) have all been left unchanged in the half-yearly review of the monetary policy on Tuesday.
In its Third Quarter Review of Monetary Policy 2012-13, the Reserve Bank of India has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent to 7.75 per cent with immediate effect.
After all, India is the only one among the BRIC nations (Brazil, Russia, India and China) where lending rates are still ruling at their 2008 peaks.
The Reserve Bank of India on Thursday hiked the cash reserve ratio (CRR), the amount of depositors' money that banks need to park with it, by half a per cent to tighten money supply, as part of concerted efforts with the government to ease inflation.The hike, which would take CRR to 8 per cent, will come into effect in two tranches of 0.25 per cent on April 26 and May 10.
While the rupee snapped a four-session downslide, it rupee could not cement intra-day gains as RBI kept short-term lending (repo) and cash reserve ratio unchanged, forex dealers said.
Of the 15 participants, 7 expect CRR cut, only one sees repo rate reduction.
'If it doesn't, it will continue with measures to infuse liquidity, signalling a new cycle,' predicts Tamal Bandyopadhyay.
In view of high inflation and deficient monsoon rainfall, the Reserve Bank may find it difficult to cut the key lending rate to boost the economy as is being demanded by the industry.
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 economy is going through a very difficult patch and business confidence has plummeted. New investments have slowed down," Assocham President Rajkumar Dhoot said during his interaction with RBI Governor D Subbarao ahead of the central bank's monetary policy review scheduled on April 17.
Some reactions to RBI's monetary policy announced on Monday.
Days ahead of the annual monetary policy, trade bodies today urged the Reserve Bank not to hike its key-rates as they fear a further tightening could push lending rates up and thus hamper growth.
Nearly three years after the Reserve Bank of India began its move towards a soft interest rate regime, the trend is seeing a slow but sure reversal.
As far as the Indian households are concerned, although the leverage ratio in this basket has multiplied nearly 3 times in the past decade, it is still well below not just developed but also most other developing economies.
After falling substantially in the previous week, inflation rose marginally by 0.06 per cent to 7.87 per cent for the week ended September 11 mainly due to costlier manufactured products including some edible oils.
The Reserve Bank of India (RBI) may opt for a 25 per cent cut in the repo rate, to prop sagging demand in the interest rate-sensitive durables sector in the mid-term review of its 2007-08 monetary policy on October 30.The likely reduction in the repo rate would take place despite concerns about inflation, which suggest that interest rates can be left unchanged, banking sources said.
India Inc's reactions to the RBI rate cut.
Consequently, the reverse repo rate under the LAF will remain unchanged at 7.5 per cent and the marginal standing facility (MSF) rate at 9.5 per cent.
This is the fourth consecutive time that the RBI has kept key interest rates unchanged despite clamours from the industry to cut rates to boost economy.
