Urjit Patel panel wanted all members to be appointed by RBI
All members of the Monetary Policy Committee (MPC) -- Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Mridul K Saggar, Michael Debabrata Patra and Shaktikanta Das -- had unanimously voted to keep the policy repo rate unchanged at 4 per cent after the three-day meet of the panel earlier this month. Further, except Varma, other members voted to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward. Varma expressed reservations on this part of the MPC resolution, according to the minutes.
The December meeting of the Reserve Bank of India's (RBI's) six-member Monetary Policy Committee (MPC) will start on Wednesday even as there is no clarity on whether Governor Shaktikanta Das, the chair of the panel, will continue in office after his term ends next week. The outcome of the meeting will be announced on Friday by Das at 10 in the morning.
The RBI on Wednesday cautioned that while the Indian economy appears capable of weathering the deterioration in geopolitical conditions amid the ongoing Russia-Ukraine war, it faces headwinds from global spillovers from geopolitical tensions, elevated commodity prices and moderating external demand. The RBI, however, did not tinker with the GDP growth projection made in April. It had slashed the GDP growth projection for the fiscal 2022-23 to 7.2 per cent from its earlier forecast of 7.8 per cent.
As deputy governor, Patel headed the RBI panel to draft the monetary policy report, which became the basis of the ongoing reforms at the apex bank
Most members of the Reserve Bank of India's monetary policy committee (MPC) decided to stick to the course on bringing retail inflation to the target of 4 per cent while voting for maintaining status quo in the April review, except external member Jayanth Varma who voted for a 25 bps cut in the repo rate. "I believe that the extant monetary policy setting is well positioned," RBI governor Shaktikanta Das said in the minutes of the policy review, which came out on Friday. "Monetary policy transmission is continuing and inflation expectations of households are also getting further anchored.
At present, the repo rate acts as the policy rate when liquidity is in deficit mode while reverse repo becomes the operating rate when there liquidity is surplus.
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.
With the 115 bps reduction in repo rate beginning February, banks have already transmitted 72 bps to the customers on fresh loans and some large banks have transmitted as much as 85 basis points.
Equity benchmarks extended their decline for the fourth straight session on Wednesday, with the Sensex falling 214.85 points after the Reserve Bank raised the key interest rate by 50 basis points. Continuous foreign fund outflows and surging crude oil prices also weighed on markets. The 30-share BSE benchmark dropped 214.85 points or 0.39 per cent to settle at 54,892.49.
The MPC headed by RBI Governor Urjit Patel said that the recent excise duty cut by the government on petrol and diesel will help contain inflation.
Demonetisation to result in short-run disruptions in cash-intensive sectors like retail, hotels, restaurants and transportation, RBI said while announcing the Monetary Policy
RBI Governor Shaktikanta Das on Wednesday defended the Reserve Bank's handling of the price situation, saying acting prematurely on inflation would have exerted a heavy cost on the economy and citizens. Acknowledging that the inflation target has been missed, Das said the RBI decided to support the economy by not introducing a rate hike in face of a spike in inflation. "We prevented a 'complete collapse of the economy' by keeping rates lower and stayed away from premature tightening," Das said speaking at the annual FIBAC conference of bankers in Mumbai.
Borrowers should consider switching from an MCLR-linked to a repo rate-linked loan.
In the second policy review under Governor Shaktikanta Das, the six-member Monetary Policy Committee voted 4:2 in favour of the rate cut.
Maintaining 4 per cent inflation is appropriate for India as targeting a lower rate could impart deflationary bias to the monetary policy, said a Reserve Bank paper. Under the current dispensation, the RBI has been mandated by the government to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side. The paper, authored by RBI Deputy Governor Michael Debabrata Patra and another official Harendra Kumar Behera, has found a steady decline in trend inflation to 4.1-4.3 per cent since 2014.
'As the Budget has taken some measures to spur growth, similar action from the MPC may be expected.'
The Reserve Bank's rate setting panel on Thursday met to finalise a report for the government on why it failed to keep retail inflation below the target of 6 per cent for three consecutive quarters since January this year, said sources. The report will be presented to the government as per the Reserve Bank of India Act, they added. The six-member Monetary Policy Committee (MPC) is headed by Governor Shaktikanta Das.
State Bank of India, Tech Mahindra, Larsen & Toubro, Tata Steel, Sun Pharma, Infosys, HCL Tech, Axis Bank, Tata Consultancy Services and NTPC were among the biggest laggards among Sensex shares. Nestle, Hindustan Unilever, Titan, Power Grid, UltraTech Cement and ITC were among the gainers.
Deputy Governor Michael Patra warned about the spillover effects of food inflation.
With no rate cuts on the table, the other monetary policy alternative could be to reduce the width of the asymmetric policy corridor or increase in reverse repo rate when the pandemic subsides, they opined.
Bank Nifty pared all its intraday gains to end over 1% lower led by losses in BoB, ICICI Bank, Axis Bank and Bank of India
The RBI's mistake may have been in interpreting its mandate to maintain retail inflation at 4%, with 2% leeway in either direction, as being a mandate that permitted it to do nothing even when inflation was at or near the upper bound of 6%, observes T N Ninan.
Jio Finance, a wholly owned subsidiary of Jio Financial Services, is likely to delay its maiden bond issue of Rs 3,000 crore, originally scheduled for this month. The decision comes amid expectations of softening yields in April because the Reserve Bank of India's (RBI's) monetary policy committee (MPC) is widely expected to cut the policy repo rate by another 25 basis points, sources said.
With the setting of MPC, the interest rate setting powers would move from RBI Governor to the panel.
Union Finance Minister Nirmala Sitharaman on Monday said people are finding current interest rates "very stressful" and urged banks to make them affordable. Speaking at an event organised by State Bank of India, the finance minister said that at present, India requires industry to ramp up and invest in new facilities, and added that lowering lending rates can help achieve the "Viksit Bharat" aspiration.
The first task before him is to get used to the idea of working with the Monetary Policy Committee
The three day MPC meeting began on Monday and the decision will be announced on Wednesday by RBI Governor Shaktikanta Das.
In its scheme of things, tackling inflation now comes ahead of ensuring growth in the world's sixth largest economy, points out Tamal Bandyopadhyay.
The Reserve Bank of India on Thursday opted for a pause second time in a row, maintaining key benchmark policy rate at 6.5 per cent as inflation moderates. The rate increase cycle was paused in April after six consecutive rate hikes aggregating to 250 basis points since May 2022. Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the rate unchanged at 6.5 per cent.
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.
RBI retained the GDP growth for the financial year 2018-19 at 7.4 per cent.
'A possible post-election growth momentum may be lost.'
The Reserve Bank of India on Wednesday expectedly left interest rates unchanged and maintained an accommodative stance as the economy faces a renewed threat to growth due to the resurgence of coronavirus cases.
Finance Minister Arun Jaitley on Saturday said that retail inflation is expected to remain close to 5 per cent
The monetary authority said it was worried on three fronts with regard to inflation as well as the economy.
The continuing global uncertainity has complicated the fight against inflation, opined Reserve Bank Deputy Governor Michael Debabrata Patra during the Monetary Policy Committee meeting held on February 8. According to the minutes of the MPC meeting released on Wednesday, RBI Governor Shaktikanta Das also mentioned that there is considerable uncertainty due to a host of global factors such as rising non-oil commodity prices. The RBI on February 8 hiked the key short-term lending rate by 25 basis points to 6.5 per cent, citing sticky core inflation.
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.
Retail inflation crossed the RBI's comfort level and rose to 5.21 per cent in December on increase in prices of food items.
The Reserve Bank of India on Wednesday kept the benchmark interest rate unchanged at 4 per cent and decided to continue with its accommodative stance against the backdrop of concerns over the emergence of the new coronavirus variant Omicron.
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