The central bank tweaked the retail inflation range to 4.8-4.9 per cent in the first half of 2018-19, and 4.7 per cent in the second half.
The government plans to bring down its stake to 26 per cent in these two banks, which are yet to be identified. This may not come in the way of getting investors for these banks, provided the government is willing to step back rather than run them the way it had been doing for over five decades since these banks were nationalised, points out Tamal Bandyopadhyay.
In his book, former governor Subbarao says Chidambaram, Pranab were piqued by his tight rate policy.
India's consumer price index (CPI)-based inflation could ease in the coming months thanks to the arrival of kharif crops, lower international commodity prices, and a pass through of lower input costs to consumers, the finance ministry said in its Monthly Economic Review (MER) for October, which was released on Thursday. The MER, however, warned that the global macroeconomic situation remained precarious and a recession in many advanced economies would impact India's exports. "Easing international commodity prices and new Kharif arrival are set to dampen inflationary pressures in the coming months.
SBI was the top gainer in the Sensex pack, rallying over 10 per cent, followed by Kotak Bank, Dr Reddy's, UltraTech Cement, ITC and HDFC Bank. On the other hand, Axis Bank, Bharti Airtel, ICICI Bank, Maruti and HCL Tech were among the laggards.
Rising crude oil prices, traction in China equities and inflation concerns back home are casting a shadow on the Indian equity markets in the short term, believe analysts at Jefferies. They said this could see the markets remaining range-bound in the near term before the next leg up.
Watal panel had suggested an independent payments regulator be set up.
Analysts are expecting inflation to fall further in October and November on base effect. Inflation measured by consumer prices has been trending down for over four months, and came in at 6.7 per cent in September.
He said the short term macroeconomic priorities of the RBI continue to focus on bringing down inflation towards the government-set target of 4 per cent
In a business friendly move, the Reserve Bank of India on Friday said that Real Time Gross Settlement System (RTGS), used for large value transactions, will be made available round-the-clock from December. In December 2019, the National Electronic Funds Transfer (NEFT) system was made available on a 24x7x365 basis. Currently, RTGS is available for customers from 7.00 am to 6.00 pm on all working days of a week, except second and fourth Saturdays of every month.
Instead of only focusing on the tenure for which the best interest rate is available, investors should also focus on their own investment horizon.
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Bankers remained ambivalent on the impact of Tuesday's policy announcement by Reserve Bank on the cost of funds and refrained from giving a guidance on the direction in which lending rates are headed.
The Nikkei Markit India Manufacturing Purchasing Managers' Index (PMI) -- a gauge of manufacturing performance -- fell to 52.3, down from October's 22-month high of 54.4.
Chances of a rate cut in April improve if core inflation continues to ease, growth falling below the projected 7.2% for FY19 and if the global trade slowdown exacerbates.
The report said that "we believe, institutions are more important than individuals" and ultimately what is important is the credibility and the independence of any institution and nothing else.
Has the Modi government been more at odds with institutions than other governments? There is no doubt that there have been more run-ins. While the RBI and CBI cases have drawn attention, there have been others, less publicised, Subhomoy Bhattacharjee points out.
"I am an academic and I have always made it clear that my ultimate home is in the realm of ideas," Rajan said in a letter to staff.
In twin blows to Indian economic revival, higher food prices drove retail inflation to a five-month high of 7.4 per cent while factory output fell for the first time in 18 months. The second consecutive month of rise in consumer price index (CPI)-based inflation will add to the pressure on the Reserve Bank of India (RBI) to again raise interest rates to tame high prices. Inflation has been above the targeted zone for the ninth month in a row and as per statute, the RBI will now have to explain to the government in writing why it failed to keep prices below 6 per cent.
Rajan said it was important that the government and the RBI be vigilant to the growth scenario.
Thanks to the recapitalisation by the government and measures taken by the central bank, collapse of any large housing finance company won't pose as big a risk as it had six months ago.
Inflation targeting has worked well and the government must stay with it, and the framework is going to work well in the period ahead also, former RBI Governor D Subbarao said on Thursday. He also said low inflation contributes to sustainable growth. Addressing the 'Times Network India Economic Conclave' virtually, Subbarao said the government's proposal to privatise some public sector units is not akin to selling family silver but it is a route for putting India on a sustainable growth path.
'People know if inflation is not within the tolerance band, then action will be taken so they do not expect inflation to rise above that.'
The Indian equity market is likely to remain under pressure and rangebound over the next few months. This comes as global central banks, led by the US Federal Reserve look at a possibility of hiking rates aggressively to tame inflation. Back home, the Reserve Bank of India, too, remains data dependent in its endeavour to keep inflation in check and pursue an aggressive monetary policy stance.
Finance Minister Nirmala Sitharaman has said the recent interest rate hike by the Reserve Bank was not surprising for her but the timing was, asserting that the rising cost of funds will not impact the government's planned infrastructure investments. For the first time since August 2018, RBI had on May 4 delivered a blunt 40 basis points increase in key repo rate to 4.40 per cent, and also hiked the cash reserve ratio by 50 basis points to 4.5 per cent after an unscheduled meeting of the rate setting panel, citing increased inflation pressures following the Ukraine war and the resultant spike in crude oil prices. Retail inflation printed at 6.9 per cent in March and the April reading is forecast to top 7.7 per cent.
The Reserve Bank is working on a phased implementation strategy for its own digital currency and is in the process of launching it in wholesale and retail segments in the near future, RBI Deputy Governor T Rabi Sankar said on Thursday. He said the idea of Central Bank Digital Currency (CBDC) is ripe, and many central banks in the world are working towards it. Sankar further said CBDC is needed to protect consumers from the "frightening level of volatility" seen in some of the virtual currencies which have no sovereign backing.
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As many as nine respondents said RBI would hold the repo rate at 8% till March-end, 2015
As the MPC is mandated to target CPI inflation rate at 4 plus minus 2 per cent, any measurement error in CPI is likely to have grave consequences for monetary policy.
After consumer price index jumped the 6.3-per cent mark in May and wholesale inflation set a record of 12.94 per cent, house economists at Swiss brokerage UBS Securities have warned that the country is facing more upside risks on the inflation front that is set to averaging at 5 per cent for the year. Rising prices of edible oils and protein rich items pushed retail inflation to a six-month high of 6.3 per cent in May, breaching the comfort level of the Reserve Bank and thus rendering reduction in interest rates a difficult proposition in the near term. Led by petrol price, that has crossed the Rs 100-mark in many states, wholesale inflation too accelerated to a record 12.94 per cent in May. While crude oil has crossed $70 a barrel on account of rising prices of crude oil and manufactured goods due to spike in commodities, and the low base of last year due to the lockdown.
Economists have said if a stimulus is needed it should be different from what was provided in 2008-09, when the economy faced the ripple effects of a global meltdown following the Lehman Brothers collapse.
Banks have issues with their balance sheet profiles, say PSB executives.
The new rates, effective Wednesday, is the third reduction by SBI in this financial year having cut the rates by 5 bps each in April and May, while its home loan rates has come down by 20 bps during this period.
The RBI may grant licences for setting up small finance and payment banks by April 2015.
'Credit expansion is probably the quickest way to get the economy going again.' 'Easy credit is like a shot of nitro in a race car: In timely, small, quick, doses it can give a tremendous boost but carried to extreme it can destroy the engine,' points out S Muralidharan, former managing director, BNP Paribas.
The Reserve Bank on Tuesday said growth is expected to fall below 5 per cent in 2013-14 in absence of pick-up in manufacturing sector, but likely to recover to 5.5 per cent in the next financial year.
With a sole mandate of inflation targeting, RBI wears many hats.
The trade gap was $11.66 billion in December 2015 while in September 2015 it stood at $10.16 billion
'The rising cost of construction, the cost of doing business, high compliance, and inflation/interest rates going up have already reduced returns to single digits.'
RBI declines to accede to plea, upheld by Padmanabhan panel, for priority sector tag; feels move would dilute claims of those needing it more.
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.
Rate cuts are unlikely to be aggressive, in our view.
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