In its scheme of things, tackling inflation now comes ahead of ensuring growth in the world's sixth largest economy, points out Tamal Bandyopadhyay.
'There is merit in keeping the central bank's balance sheet strong if the government's fiscal balance sheet is weak.'
The panel may include or seek inputs from former RBI Governor Urjit Patel, former chief economic advisor Arvind Subramanian, Sajjid Chinoy of the PM-EAC, Rathin Roy, among others.
'If the RBI board forces the management's hand on all the key issues, it should be prepared for resignations by the governor and the key deputy governor, Viral Acharya,' warns T N Ninan.
The bank, however, maintained that the incremental benefit from the MCLR based lending rates introduced in April 2016 as an alternative to the earlier system of base rate, was positive.
The banking sector in India is reeling under Rs 8 lakh crore of non performing assets (NPAs) or bad loans, of which PSU banks alone account for over Rs 6 lakh crore.
The final and most significant reset in the relations between the government and the RBI is the manner in which the process of appointing the governor and deputy governors of the central bank has been changed.
Instead of a rate hike, or even a pause, there could be a window for the RBI for an interest rate cut
'It will be interesting to see how Dr Patel handles gadflies with the maturity of egregiously petulant three year olds.' 'That Dr Patel does not, in so far as we can tell, cause society matrons to gush like hormonal teenagers can only be a good thing for him.' 'Look where their febrile imaginations and breathless prose took his predecessor.'
Given Indian corporates's high indebtedness, new credit will be used for servicing loans rather than building factories. This is setting us up for more companies on life support and more zombie banks, warns Rahul Jacob.
Monetary policy stance to depend on inflation data
Banks might not have realised the exact implication of risky projects under PPP projects, which were getting implemented under high leverage
Shifting its stance of monetary policy towards targeting retail inflation as it is an "inequitable tax", RBI today said it may exceed 8 per cent by March end and efforts will continue to bring it down.
Governments that do not respect central banks' independence will sooner or later incur the wrath of the financial markets, ignite economic fires, and come to rue the day they undermined an important regulatory institution; their wiser counterparts who invest in central bank independence will enjoy lower costs of borrowing, the love of international investors, and longer life spans, said Acharya, who will return to the New York University's Stern Business School in August.
Raghuram Rajan said the passage of the GST Bill augurs well for the growing political consensus for economic reforms.
With Deputy Governor Viral Acharya and another member Chetan Ghate voting for a status quo, RBI governor Shaktikanta Das and three others outvoted them for reduction in repo rate to 6.25 per cent from the existing 6.50 per cent.
Currency scarcity weighed on manufacturing performance where growth of new work flows slowed
Subbarao said he would be "ok" if a sovereign bond issue in foreign currency is done once just to test the waters, but cautioned against using the instrument regularly.
Both the new designs, Rs 500 and Rs 2,000, will be very friendly towards the visually-impaired by having features which make it accessible for all sections
However, RBI would continue to nudge banks to cut lending rates
For July-September, it pegged CPI-based retail inflation at 4.2 per cent which it saw firming up to 4.8 per cent in the second half of the current fiscal.
'I am sure Dr Patra will get the fullest cooperation from the finance minister who needs workhorses, not prima donnas constantly looking to improve their CVs,' says T C A Srinivasa-Raghavan.
The 6-member Monetary Policy Committee, headed by Reserve Bank of India Governor Urjit Patel, in its fifth bi-monthly review, kept the repo rate unchanged at 6 per cent and reverse repo at 5.75 per cent.
'PNB had confirmed compliance with the RBI's prescription in its circular of August 3, 2016, which has now turned out to be factually incorrect,' Minister of State for Finance Shiv Pratap Shukla said in Rajya Sabha on Tuesday.
A staunch defender of demonetisation, it would be interesting to see how he handles the government's increasing demand for more cash from the RBI, and letting some weak banks get out of prompt corrective action.
The six-member monetary policy committee voted 5:1 for the decision, with only Ravindra Dholakia voting for a 0.25 per cent reduction in rates.
Major gainers in the Sensex pack were Hero Motocorp, which rallied 7.01 per cent, followed by Bharti Airtel (6.69 per cent), Yes Bank (5.30 per cent), Adani Ports (4.90 per cent), Tata Steel (3.75 per cent) and Bajaj Auto (3.70 per cent).
Prices of food articles contracted by 3.47 per cent in June on a yearly basis. Vegetable inflation stood at (-)21.16 per cent.
'The RBI is something like a seat belt. As a driver, the driver being the government, it has the possibility of not putting on a seat belt but of course if you do not put on your seat belt you get into an accident and the accident can be quite severe,' Raghuram Rajan told CNBC TV18. 'The aim of the board is to be Rahul Dravid -- sensible, thoughtful and not, with due respect, Navjot Sidhu,' he added.
The career bureaucrat-turned-central banker walked into the 19th floor corner room of the Reserve Bank on December 12, 2018. Since February 2019, the Das-led RBI has cut the repo rate by a whopping 135 basis points to support the sagging growth, including an unprecedented 35 bps reduction in August. As he completes one year at the helm, woes in the NBFC sector, overall health of the banking sector and steeply falling economic growth are among the major challenges that needs to be tackled sooner than later.
The HR challenge seems to be one of the most important issues that RBI Governor Shaktikanta Das will have to tackle.
Many banks are contemplating to set up additional counters for withdrawal to meet the rush
The move will likely attract more retail investors.
India will have to show more willingness to import, and since Biden will not encourage sale of oil and gas to bridge the gap, it means there has to be more meaningful duty reduction in other areas even if Delhi baulks at a Free Trade Agreement so soon after walking out of RCEP.
T C A Srinivasa-Raghavan recalls a tussle between the government and RBI when Rajiv Gandhi was prime minister and how it was resolved.
If the new governor can think out of the box even as he signals that he can bat for the RBI cadre and respect its institutional memory, that will go a long way in getting out of the current impasse.
RBI has kept interest rate unchanged at 8 per cent since January
The board deliberated on the governance framework of the RBI and it was decided that the matter needs further examination
The panel was set up to suggest ways to reform India's monetary policy.
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