The government has extended the term of Reserve Bank of India Governor Shaktikanta Das by another three years upto December 2024, according to an official order.
Given the pressure from India Inc and the banking fraternity, it is surmised that the portfolio rejig will take place before April.
Of the six-member rate-setting monetary policy committee, five members voted for a 25 bps cut while one by 40 bps, the RBI said.
This is the fifth straight cut in rates by the Reserve Bank of India in as much policy reviews in 2019, and takes the total quantum of reductions to 1.35 per cent.
The Reserve Bank on Friday retained the GDP forecast for the current financial year at 9.5 per cent and flagged global semiconductor shortages, elevated commodity prices and potential global financial market volatility as downside risks to economic growth. In his address after the three-day meeting of the rate-setting panel, RBI Governor Shaktikanta Das said recovery in aggregate demand gathered pace in August-September, and it is reflected in high-frequency indicators, like railway freight traffic; port cargo; cement production; electricity demand; e-way bills; GST and toll collections. "The ebbing of infections, together with improving consumer confidence, has been supporting private consumption," he said, and added the pent-up demand and the festival season should give further fillip to urban demand in the second half of the financial year.
Here is some background on the candidates seen as potential successors to Rajan at the RBI
Equity benchmark Nifty scaled the psychological milestone of 21,000 in afternoon trade on Friday, and the Sensex touched its all-time intraday high of 69,888.33 after the central bank's decision to keep policy rates unchanged in line with market expectations. The 50-share benchmark index opened on a bullish note, after taking a breather on Thursday, and rose to 21,006.10. As many as 25 stocks were trading in the green, and 24 stocks defied the broader market and were trading in the negative territory.
Top Sensex gainers include Hero MotoCorp, Bajaj Auto, Asian Paints, IndusInd Bank, HUL, and Maruti, rallying up to 5.87 per cent. While, ICICI Bank, NTPC and ITC slipped up to 0.13 per cent.
The Reserve Bank will hold a special meeting of its rate-setting committee on November 3 to prepare 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. The six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das will prepare the report on reasons for failure to meet the inflation target as well as the remedial measures the central bank is taking to bring down prices in the country. "Under the provisions of Section 45ZN of the Reserve Bank of India (RBI) Act 1934... an additional meeting of the MPC is being scheduled on November 3, 2022," RBI said in a statement on Thursday.
Kotak Mahindra Bank was the biggest loser in the Sensex pack, sliding 2.68 per cent, followed by Tech Mahindra, Mahindra & Mahindra, Axis Bank, Hindustan Unilever, Tata Motors, Tata Consultancy Services, Bajaj Finserv, Bajaj Finance, Nestle and Titan. In contrast, NTPC, Power Grid, Larsen & Toubro, HDFC, Reliance and HDFC Bank were the gainers.
In order to provide an impetus to digital funds movement, it has been decided to do away with the charges levied by the RBI for transactions processed in the RTGS and NEFT systems, RBI said.
Equities went into a tailspin on Wednesday after the Reserve Bank surprised the market with a mid-cycle rate hike in a bid to tame soaring inflation.
If imputed inflation for April and May is used, then you have inflation of over 6 per cent for two consecutive quarters, which is a worrying signal for the RBI.
The Reserve Bank may go for a final 25 basis points increase in the current rate hike cycle next week and a reduction would come in only by the end of third quarter of FY24, economists at Axis Bank said on Wednesday. As per media reports, RBI officials met economists on Tuesday, and the latter have suggested the central bank to go for a 25 basis points hike in key rates. Since May 2022, the RBI has hiked rates by 250 basis points, hurting borrowers and some are already concerned about loan tenors extending beyond their working lives as a result of the hikes.
The Reserve Bank of India on Friday raised the retail inflation forecast for 2021-22 to 5.7 per cent due to supply side constraints, high crude oil and raw materials cost. The RBI in June had pegged the retail inflation estimate at 5.1 per cent for the current financial year. The RBI has the mandate to keep inflation in a band of 2-4 per cent, with a tolerance level of 2 per cent on either side.
Five of the six external members had suggested that the central bank should reduce the policy rate.
A continued focus on low inflation will be important to keeping gold imports, IMF said.
Concerned over elevated inflation, Reserve Bank of India on Friday decided to leave the benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance, implying more rate cuts in the future if need arises to support the economy hit by the Covid-19 pandemic.
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.
India's services sector activity eased in August but growth rates for new orders remain elevated, as services firms indicated the sharpest upturn in new export business which acted as a catalyst for firms to expand their workforces as well as output, a monthly survey said on Tuesday. Despite falling from 62.3 in July to 60.1 in August, the seasonally adjusted S&P Global India Services PMI Business Activity Index indicated one of the strongest increases in output seen since mid-2010. For the 25th straight month, the headline figure was above the neutral 50 threshold.
The wholesale price-based inflation eased to 15.18 per cent in June on lower prices of manufactured and fuel items, even though food articles remained costly. The Wholesale Price Index-based inflation was at a record high of 15.88 per cent last month and 12.07 per cent in June last year. The WPI inflation in June has bucked the three-month rising trend but remained in double-digit for the 15th consecutive month beginning April last year.
A likely easing in inflationary pressures in the forthcoming months will reopen the window for the RBI to once again prioritise growth and ease its interest rates.
The broader 50-issue NSE Nifty too slipped from its record high, shedding 10.30 points or 0.09 per cent to end at 11,346.20.
The members of the Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC) voiced different views on the interest rate and stance, with two of them indicating they may not vote for further rate increases even if Governor Shaktikanta Das and Deputy Governor Michael Patra maintain bringing down inflation as their primary objective, the minutes of the December review of the monetary policy showed. The other two members remained neutral. The MPC increased the policy repo rate by 35 basis points (bps) - which was lower than the previous three hikes of 50 bps. The repo rate has been hiked by 225 bps to 6.25 per cent since May this year.
Shaktikanta Das is a master of the finest balancing act who listens to all but takes his own decisions, discovers Tamal Bandyopadhyay.
'Government of India has the right to give directions to RBI'.
Manufacturing activities in India fell to a five-month low in September as new orders rose at a softer pace, which tempered production growth, a monthly survey said on Tuesday. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) fell to 57.5 in September, down from 58.6 in August -- the lowest in five months. The September PMI data pointed to an improvement in overall operating conditions for the 27th straight month.
Market breadth depicted gains with 1,476 advances over 1,403 declines on the BSE. 140 stocks remained unchanged.
Reversal in the declining economic growth trajectory is clearly the need of the hour and all steps should be taken to bring about this change.
India's prices are rising faster than many of its emerging market peers. The country's inflation print for May at 4.25 per cent is a marked reduction from the levels seen in May 2022 (7.04 per cent). However, even though the inflation rate remains within the Reserve Bank of India's medium-term target of 4 per cent, with a 2 per cent margin on either side, it continues to be higher than China, Russia, and Brazil.
DBS called Rajan's decision not to seek an extension as a 'negative surprise'.
Focus on inflation, higher CPI projection dampen bond market mood.
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.
Sentiments were also bearish largely in tandem with a sell-off in global markets as US Treasury yields surged to multi-year highs on robust economic data and comments from the Federal Reserve, sparking fears of accelerating inflation, brokers said.
The Reserve Bank's rate-setting panel will start its 3-day deliberations on Wednesday amid expectations of yet another rate hike of 50 basis points to check high inflation, in line with similar actions taken by other major central banks, including the US Fed. Based on the recommendations of the Monetary Policy Committee (MPC), the RBI had effected 50 basis points increase in repo rate each in June and August after raising the short-term lending rate by 40 basis points in an off-cycle decision in May. The MPC, headed by RBI Governor Shaktikanta Das, is scheduled to meet during September 28-30.
The stock markets, which had opened in the green on rate cut hopes, tumbled after the monetary policy announcement.
The Reserve Bank of India is likely to cut policy rates by 0.25 per cent and keep the cash reserve ratio unchanged at its policy review next week, on the back of slower-than-expected growth and more encouraging inflation readings, says a report by HSBC.
Deficits could come under more pressure in coming years as states implement their own Pay Commissions.
Headed by Urjit Patel, MPC for the fourth straight time kept the repo rate unchanged, at which it lends to the banks, at 6.25 per cent. The reverse repo, at which RBI borrows, will be 6 per cent.
Inflation in the 'fuel and power' basket in December slumped to 8.38 per cent, nearly half of 16.28 per cent.
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