After Urjit Patel's appointment as RBI governor-designate, the bond market witnessed a sell-off, as it became evident that there won't be any significant change in stance
RBI Governor Raghuram Rajan, who today surprised markets with a rate hike, defended the move saying a rate cut would not have impacted either banks or borrowers and that bringing down retail prices is the key to sustainable growth.
The speed at which he led the central bank in different areas -- ranging from internal reorganisation to inflation fighting, stabilising the currency, taking on rogue corporations, cleaning up bank balance sheets, and opening the sector -- makes one believe that Rajan knew he had only three years to do his job. A fascinating excerpt from Tamal Bandyopadhyay's MUST-READ Roller Coaster: An Affair with Banking.
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.
The government would also take steps to promote exports and restrict non-essential imports, said Jaitley
There is as yet no clarity on how the process of consulting with the RBI Governor, initiated under Section 7 of the RBI Act, would unfold in the coming days. The government is keen that its suggestions made in the public interest should be heeded by the central bank, says A K Bhattacharya.
In its scheme of things, tackling inflation now comes ahead of ensuring growth in the world's sixth largest economy, points out Tamal Bandyopadhyay.
'Rajan brought in a healthy air of competition in the banking sector.'
.jpg)
Food and fuel inflation in India have remained high for several years, the paper said, adding to durably reduce the current high inflation, the monetary policy stance needs to remain tight for a considerable length of time.
The bright yellow coloured notes will hit the market just a day after the announcement by Finance Minister Arun Jaitley that the government has given a go-ahead to the RBI to issue the new currency bill.
'GIFT City is now on a growth trajectory,' says Tapan Ray, MD and group CEO, GIFT City, 'The time has come for the GIFT City to take the big leap and emerge as the next financial hub of Asia.'
.jpg)
Industry's demand for a reduction in the repo rate, currently 8 per cent, has gained momentum after wholesale and retail inflation eased in February.
'Most importantly, marking a departure from the past, the RBI has made it clear that it is not overtly worried about the level of the local currency,' notes Tamal Bandyopadhyay.
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.
In case the repo rate keeps trending downwards, borrowers can expect a downward revision of their MCLR-linked loans.
2018 has been a disappointing and highly volatile year for equity investors.
A two-year extension at the helm of the RBI still looks a real possibility
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.
In the broader markets, the BSE Midcap and Smallcap indices extended gains and were up over 1% each
'With 27 days to go, the total bank deposits has come tantalisingly close to the Rs 14 lakh crores of banned notes which was in the financial system on November 8.' 'Black money hoarders may have actually laundered their black money into white,' argues Rajeev Sharma.
In all, RBI has cut interest rates by 110 bps this year. But this has not yet led to a boost in economic activity. While the growth rate has slowed to a five-year low, consumer confidence is waning and foreign direct investment has plateaued.
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.
'I want the prime minister to be punished because he put our country in difficulties as he took this decision without Cabinet approval.' 'When he had already ordered the printing of new currency notes on May 19, 2016, why did he tell lies to the country?'
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.
Growth in the third quarter (October-December) is expected to be the weakest in years, with spending hit due to unavailability of enough replacement currency.
Only Rs 16,050 crore out of the Rs 15.44 lakh crore of the old high denomination notes have not returned.
RBI Governor Raghuram Rajan on Friday pitched for incentivisation of domestic savings to boost investments in the country.
RBI data show one-fifth of all the infrastructure loans are stressed and the share of such loans in overall stressed assets is nearly a third.
Reserve Bank of India Deputy Governor Viral Acharya is the eighth economist to quit since the Modi government took office.
The HR challenge seems to be one of the most important issues that RBI Governor Shaktikanta Das will have to tackle.
Given the macro setting, the outlook remains positive for each of the four key parameters - inflation, current account deficit, fiscal deficit and currency stability, says Rahul Bhushkute.
The windfall from RBI may be used to trim borrowing, help fund Rs 3.3 lakh crore capex plan, capitalise banks and provide fiscal stimulus to some stressed sectors, experts and economists said.
'This is not without risk because extraordinary steps taken in exceptional times have the habit of becoming habits until the next crisis intervenes,' warns T N Ninan.
Desperate times need desperate actions, and the BJP's only option is to enforce legislation to build a Ram mandir, says Sunil Sethi.
While Arun Jaitley remains part of the decision making process, Piyush Goyal, who was given additional charge on May 14, attends cabinet meetings and takes the day-to-day decisions.
'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.
'I suspect the recovery that the banks are going to get out of this IBC is not going to be more than 30 per cent.' 'If you leave the steel industry aside, the recovery rates are not looking very, very healthy,' Jairam Ramesh tells the Rajya Sabha.
.jpg)
As many as nine respondents said RBI would hold the repo rate at 8% till March-end, 2015
RBI said inflation in the second half of the current fiscal is projected at 2.7-3.2%. It retained its GDP forecast for the current fiscal at 7.4%
'His (Das) approach to work seems that of working as a team with ease in communication.'
© 2026 Rediff.com - Advertise with us - Disclaimer - Privacy Policy - Sitemap - Feedback - About us - Terms of use - Grievances