The Reserve Bank on Friday eased money supply further by cutting key policy rates and ratios - decisions that would among other things infuse Rs 20,000 crore (Rs 200 billion) into the banking system.
Reserve Bank of India said on Thursday it is looking at liquidity, inflation and credit growth to see if it will have to take more steps to tighten monetary conditions.
The Reserve Bank has kept the key policy rates unchanged, while the Cash reserve Ratio (CRR) has been cut by 25 bps to 4.25%.
The Reserve Bank has kept the key policy rates unchanged in its Mid-Quarter Monetary Policy Review.
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.
Industry body Confederation of Indian Industry said with the government having announced a clear road map for fiscal consolidation and non-food inflation demonstrating a secular decline, conditions are conducive for RBI to have intervened with a repo and cash reserve ratio reduction.
High inflation continues to be an obstacle in lowering policy rates as of now.
The Reserve Bank of India on Tuesday left all the key interest rates unchanged in the first quarterly review of the monetary policy.
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.
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.
The Reserve Bank of India has left bank rate and cash reserve ratio unchanged at 6 per cent and 4.5 per cent, respectively.
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 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.
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.
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.
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.
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.
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.
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.
The Reserve Bank on Monday said asset quality of banks improved further and their gross non-performing assets (GNPA) or bad loans ratio declined to a 12-year low of 2.6 per cent in September 2024 on the back of falling slippages and steady credit demand. The RBI also flagged concern over a sharp rise in write-offs, especially among private sector banks (PVBs), which could be partly masking worsening asset quality in unsecured lending segment and dilution in underwriting standards.
"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.
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.
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.
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.
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.
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