The Reserve Bank of India raises Cash Reserve Ratio by 75 basis points at 5.75 per cent. RBI, hwoever, has kept the repo and reverse repo rates unchanged at 4.75 per cent and 3.25 per cent, respectively.
If you are running a sweetmeat shop, will you manage a dairy for milk supply or buy milk from the market? Banks are running a dairy (which has its cost for processing milk), while NBFCs are buying milk from the market, observes Tamal Bandyopadhyay.
HDFC and HDFC Bank's merger - touted as India's biggest-ever corporate merger - pumped up shares of the two entities on the bourses. Shares of Housing Finance Development Corporation (HDFC) skyrocketed 9 per cent while those of HDFC Bank zoomed 10 per cent. In comparison, the benchmark S&P BSESensex and the Nifty50 indices settled 2.2 per cent higher on Monday.
Much depends on how the liquidity situation evolves over the coming months, with greater clarity expected from the next monetary policy meeting scheduled for December 7.
Bankers need to take a call on whether they will allow technology firms to run banks or banks themselves will turn into tech firms, says Tamal Bandyopadhyay.
SBI Chairman Pratip Chaudhuri on Tuesday once again expressed his open disagreement with the RBI on cash reserve ratio (CRR) saying it is a "waste" for the economy and successive interest rate cuts by central bank have failed to contain inflation.
The Reserve Bank might hike the Cash Reserve Ratio (statutory cash balances banks maintain with the apex bank) by 0.50% in its credit policy if inflation remains high, feel Indian bankers. The RBI is scheduled to announce annual credit policy for fiscal 2008-09 on April 29. RBI is likely to tighten money supply in its forthcoming annual credit policy to suck out excess liquidity from the system. Growth has moderated in recent months.
Majority of India Inc is of the view that extreme moves in the form of monetary tightening made by the Reserve Bank to curtail inflationary pressure would slow down economic growth, a survey by industry chamber Assocham reveals.
Experts say the central bank will refrain from using the CRR as a liquidity tool, as a reduction in the rate will go against its current anti-inflationary stance.
'When you need to revive the economy, when you need to revive aggregate demand, you cut taxes.' 'But what's this government doing?' 'It's increasing taxes for the middle class and the vast majority of the poor on fuel, which has a ratchet effect on most other products.'
A day after RBI deputy governor's comment, Chaudhuri says his idea on cash reserve ratio was meant to ignite public debate
RBI said the outlook for economic growth for 2016-17 has turned uncertain after the unexpected loss of momentum by 50 basis points in Q2 and the effects of the withdrawal of banned notes
Hike in CRR to suck out Rs 12,500 crore from the banking system.
The country's two biggest state-run lenders on Saturday pitched for treating a portion of their gold deposits as part of the mandatory cash reserve ratio (CRR) or statutory liquidity ratio (SLR), both of which banks consider as non-productive.
The central bank has also left the Bank Rate and the Cash Reserve Ratio unchanged at 6 per cent and 5 per cent, respectively, in the annual policy announcement 2007 released on Tuesday.
With enough liquidity in the system, lending and deposit rates are likely to fall further
India grew at 6.7 per cent in 2008-09. For the current fiscal 2009-10, the Economic Survey projected a 7 per cent growth rate plus/minus 0.75 per cent.
Leeway on CRR and SLR was a long-standing demand from banks, which the RBI did not agree to till recently.
India's central bank withdraws cap of Rs 3,000 crore (Rs 30 billion) on daily reverse repo (overnight borrowing) transaction from August 6.
The new effective repo rate for the third quarter is now fixed at 7.25 per cent while CRR rate has revised to 4 per cent.
Bank lending has seen a significant fall. RBI needs to bring liquidity into the system immediately.
Despite several constraints, the policy has tried to support growth through more liquidity infusion.
RBI had last week announced a 0.5 per cent increase in cash reserve ratio to 5.5 per cent in two phases to absorb excess liquidity from the economy and check rising prices.
RBI expects more from the government than last week's very limited package of reforms and fiscal measures.
The key short-term lending rate (repo rate)has been hiked by 0.25 pc to 7.50 pc.
Morgan Stanley expects RBI to cut rates sharply rather than "dribble down".
Calling out the high real interest rates -- the differential between the policy rate and headline inflation -- as an impediment to investment, the SBI report said the RBI can cut rates by 0.35-0.50 per cent at its next policy announcement.
The non-food component in the price basket will continue to keep inflation at a high level and result in a "long pause" in interest rates, a foreign bank said on Wednesday. The central bank is likely to pare the pandemic-driven emergency response as well, the report by Singaporean lender DBS said. It can be noted that the high inflation driven by the food prices has forced the RBI to go for a status quo in rates for the three consecutive reviews of the bi-monthly policy meetings, even as growth continues to be in the negative territory.
The move may release funds locked in government securities and add to liquidity. With inflation expectations lowered, this should not impact bond sentiment in the short run
Bankers expect RBI to help them spur lending growth.
Banks want lower provisioning burden on recast debt, interest on cash reserve ratio deposits.
Banking, realty and capital goods sectors-- the sectors which are more interest sensitive and hence battered for long now--were the winners today.
These are the highlights of the seventh bi-monthly monetary policy statement for 2019-20 by the RBI amid COVID-19 pandemic:
Bank of America Merrill Lynch on Monday trimmed India's economic growth estimates by 30 basis points to 7.1 per cent for the current fiscal, while global financial services giant Morgan Stanley downgraded its GDP growth forecast for the current fiscal to 7.3 per cent from the earlier 7.7 per cent.
Business houses expect rate cut in next RBI policy.
Let's take a quick look at what all these terms mean to see how they affect the loan interest rates.
Most bankers on Monday ruled out the possibility of lending rates softening following RBI's move to suck out excess liquidity, but housing finance leader HDFC sees a scope for reduction."There is enough liquidity in the system, softening of lending rate could happen," HDFC chairman Deepak Parekh said. Interest rates can come down despite CRR (percentage of total deposits that banks keep with RBI) hike, he said.
RBI likely to cut rate early next year.
Interest rates on home and retail loans are expected to rise, as a fallout of Reserve Bank announcing a 0.5 per cent hike in Cash Reserve Ratio (CRR) to squeeze money supply to rid the economy of inflation. The CRR, the amount of funds banks are required to park with the apex bank, has been raised to 8 per cent to suck out Rs 18,500-crore liquidity from the system.
© 2026 Rediff.com - Investor Information - Advertise with us - Disclaimer - Privacy Policy - Sitemap - Feedback - About us - Terms of use - Grievances