With a sole mandate of inflation targeting, RBI wears many hats.
The bond market expects at least 25 basis points cut in the June 6 policy.
As he projected a grim outlook for the economy, RBI Governor said that amidst this encircling gloom, agriculture and allied activities have provided a beacon of hope on the back of an increase of 3.7 per cent in foodgrains production to a new record.
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.
If indeed we want the board to manage the RBI, probably the government should take a close look at the US Federal Reserve system which has a two-part structure - a central authority in Washington, DC, and a decentralised network of 12 Federal Reserve Banks located throughout the country, says Tamal Bandyopadhyay.
Instead of a rate hike, or even a pause, there could be a window for the RBI for an interest rate cut
TCS, Bajaj Auto, Adani Ports and Cipla were the top gainers on BSE Sensex while Coal India, GAIL, Dr Reddy's and Infosys lost the most on the index.
There were more than three losers against every gainer on BSE
Backloading the government's borrowing programme suggests the finance ministry's confidence in better revenue numbers, says A K Bhattacharya.
If the concerns over risking political capital are overcome, the long-term gains for the Indian economy will be immense, asserts A K Bhattacharya.
FPIs, which are holding large exposures in Indian debt, could also be expected to book some capital gains as yields slide down
Central banking is a science, not an art, Tamal Bandyopadhyay tells RBI Governor Shaktikanta Das.
Stressed MSME borrowers would be eligible for restructuring of debt, if their accounts were classified standard.
Rumours in the bureaucracy on his successor include the names of Sajjid Chinoy of JP Morgan, Rathin Roy of the National Institute of Public Finance and Policy, Neelkanth Mishra of Credit Suisse and the principal economic advisor, Sanjeev Sanyal.
Banks have issues with their balance sheet profiles, say PSB executives.
SBI is the first major state-run bank to hike lending rates after short-term rates rose as a result of the Reserve Bank of India's liquidity tightening moves announced in July.
"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.
Chaos in Parliament threw a spanner in the government's efforts to revive the economy and kick-start reforms.
Some say the MPC will raise the rate, while others are of the view that there is already de facto interest rate tightening through rising bond yields, which might prompt the central bank to go for a pause.
Economists and investors want RBI to retain independence in setting rates
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%
As a result, the forecast of eight per cent retail inflation by January next year looks achievable.
An action on the rate front is unlikely to figure in Rajan's plan for the moment.
The Reserve Bank of India unexpectedly raised its policy interest rate on Tuesday by 25 basis points (bps) but said that if consumer price inflation eases as projected, it does not foresee further near-term tightening.
To cut interest rates, the central bank head has to open up a debate on inflation target revision.
After unseasonal rains, supply disruptions and pandemic-induced woes pushed retail inflation well over the Reserve Bank's comfort zone in 2020, the scenario is likely to stay that way at least in the short term as economic recovery slowly gains foothold. For most part of this year, pricier food items pushed the retail inflation, based on Consumer Price Index (CPI), higher in the range of 6.58-7.61 per cent, except for March when the reading was 5.91 per cent. Experts believe retail inflation is likely to average around 6.3 per cent this fiscal and mostly will remain sticky going forward owing to pick-up in demand across sectors.
'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.'
While they have restructured loans, there is still question mark over the success of such a work-out
'Election years tend to see high government expenditure on unproductive schemes, though that money sloshing around can boost private consumption.' 'Again, it can mean higher inflation,' explains Devangshu Datta.
Suggesting steps to boost the Indian economy, the IMF chief further said the government should focus on fiscal consolidation.
'We get to know secrets such as some of India's top-rated firms do not always make payments when due and many State-owned, listed, enterprises that borrow in bond markets default regularly.' 'Without naming the bank, he says that ever-greening of poor loans by a part of India's shadow banking lay at the doorstep of India's banking, notably 'one private bank'.' Viral Acharya's Quest for Restoring Financial Stability in India won't be music to many ears, observes Tamal Bandyopadhyay.
The message to bankers from Raghuram Rajan was clear.
As inflation rate is near the upper limit of the comfort zone, experts rule out rate cuts anytime soon
Home Minister Rajnath Singh said that the decision could cost the government roughly Rs 15,000 crore.
The change from wholesale to retail inflation as an anchor means that the weightage of diesel in inflation has decreased
RBI conducts interviews for first lateral hire for CGM post; deputy governors to head four distinct verticals.
The RBI has this year cut interest rates by 110 basis points in four instalments but banks have passed only a part of it to borrowers. Before the last reduction earlier this month of 35 basis points, the bank on an average had passed only 29 basis points out of 75 basis points cut affected during 2019.
'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 financial crisis has challenged the intellectual assumptions on which previous regulatory approaches were largely built, and in particular the theory of rational and self-correcting markets.
For the first time, the value of card and mobile payments of Rs 10.57 trillion was more than ATM withdrawals of Rs 9.12 trillion in Q4 of fiscal 2019-20. In the months of lockdown, the gap may have widened further, but cash could be back in vogue when the situation normalises.
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