The Reserve Bank of India in its quarterly monetary policy review has hiked rates.
RBI Governor Raghuram Rajan asked banks to follow suit and pass on the rate cuts.
The Reserve Bank of India's (RBI's) state of the economy report observed that any durable alignment of headline retail inflation with the target of 4 per cent could recommence in the second half of FY25 and sustain until numbers closer to the target are seen during the course of FY26, dashing hopes of any reduction in the policy repo rate in the current financial year. The report, authored by RBI staffers, including Deputy Governor in charge of monetary policy Michael Patra, said though headline numbers may fall in July and August due to base effect, it is likely to reverse in September.
Indian economy is in a sweet spot, with a mix of solid growth and moderating inflation, Moody's Ratings said, forecasting a 7.2 per cent GDP growth in the 2024 calendar year and 6.6 per cent in the next. In its Global Macro Outlook 2025-26, the rating agency said the global economy has shown remarkable resilience in bouncing back from supply chain disruptions during the pandemic, an energy and food crisis after the Russia-Ukraine war began, high inflation and consequent monetary policy tightening.
The Reserve Bank on Friday said India is poised to become the growth engine of the world as it retained the GDP projection for the current fiscal at 6.5 per cent. Unveiling the bi-monthly monetary policy review, Reserve Bank of India (RBI) Governor Shaktikanta Das said the domestic economy exhibits resilience on the back of strong demand.
The Reserve Bank of India on Wednesday evening increased the repo rate -- the rate at which the central bank's lends short-term money against government securities to banks -- by 25 basis points to 8 per cent.
The new rates vary from 8.80 to 9.05 per cent on various slabs of loans.
Due to tight liquidity condition, RBI would cut cash reserve ratio.
Industry houses are emphatic with the RBI pruning repo rate and CRR by 0.25 per cent each after a long nine months in its third quarter monetary policy review.
ICICI Bank, the second-largest private sector lender and state-owned Indian Bank on Monday raised their lending rates across all tenors in anticipation of a rate hike by the RBI later this week. The rates have been increased across all tenors under the marginal cost of funds-based lending rate (MCLR) system, a move that will make EMIs expensive for those who availed loans benchmarked against the MCLR. Under the revised rates, effective August 1, ICICI Bank's one-year MCLR has increased by 15 basis points or 0.15 per cent to 7.90 per cent, while the overnight MCLR rose to 7.65 per cent, as per information posted on the bank's website.
The central bank has hiked however reverse repo rate by 0.25 per cent.
With interest rates rising there are doubts if teaser rate home loans offered by banks will come to an abrupt halt.
Two days after the repo rate cut, the Reserve Bank of India governor Bimal Jalan on Monday said the soft interest rate bias will continue.
Analysts feel the RBI should not opt for another hike in the calendar year.
RBI Governor D Subbarao aims to revive growth by increasing the flow of credit through reduction in policy rates. By reducing the repo rate by another 25 basis points, he is hinting at a further reduction in interest rates. And, through the 25 bps cut in reverse repo rate, he is trying to make it less remunerative for banks to park surplus liquidity with the central bank and instead prodding them to lend more to the productive sectors.
The central bank had nudged banks to cut lending rates.
RBI ups inflation target to 7 per cent from 6 per cent projected earlier.
'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.'
'Some buyers believe prices may correct in the future.' 'This is unlikely. Many developers are increasing prices amid strong sales and inflationary trends.'
Declining price of vegetables pulled down inflation to over three-year low of 5.96 per cent in March, core inflation moderated to 3.5 per cent and food price inflation also eased to 8.2 per cent, which is likely to prompt the RBI to consider a rate cut in its annual monetary policy next month.
India's manufacturing sector growth eased slightly in July, on softer increases in new orders and output, while cost pressures and demand strength led to the steepest increase in selling prices since October 2013, a monthly survey said on Thursday. The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) moderated slightly from 58.3 in June to 58.1 in July.
'We will be very, very proactive in providing whatever liquidity requirements are needed.'
Former RBI governor Raghuram Rajan on Monday said the central bank will have to raise interest rates to tame inflation and the hikes need not be considered by politicians and bureaucrats as some "anti-national" activity. Known for his frank views, Rajan also said it was important to remember that the "war against inflation" is never over. "Inflation is up in India. At some point, the RBI will have to raise rates, like the rest of the world is doing," he said in a LinkedIn post.
With RBI's repo rate cut and strong macroeconomic fundamentals like benign inflation, strong forex reserves and stable rupee, GDP growth is expected to be higher and interest rates are poised to touch new lows, PNB Gilts has said.
Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with the Reserve Bank of India. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.
Among the 30 Sensex firms, Asian Paints, Infosys, JSW Steel, UltraTech Cement, Power Grid, Larsen & Toubro, HCL Technologies and Tata Steel were the biggest laggards. Tata Motors, HDFC Bank, Bharti Airtel, ITC, IndusInd Bank and Axis Bank were the gainers.
HDFC Bank has hiked its benchmark prime lending rate (BPLR) by 0.25 per cent to 15.25 per cent with immediate effect.
Amid speculations that home and personal loan rates may go up, government said on Wednesday the 0.25 per cent hike in Reserve Bank of India's short term lending rate is not intended to make loans costlier but to make banks self sufficient.
Housing sales are likely to be hit, especially in affordable and mid-income categories, following the RBI's decision to hike repo rate, according to real estate developers and consultants. However, the impact of RBI's decision to raise the benchmark lending rate by 50 basis points to 5.40 per cent is expected to be for a short term, they added. This is the third consecutive rate hike after a 40 basis points and 50 basis points increase in May and June, respectively.
"In view of the festival season and extending the benefits to customers across all segments, we have reduced our MCLR by 10 bps across all tenures," the bank said in a statement.
Encouraged by softening inflation, the RBI on Thursday decided to cut the benchmark interest rate by 0.25 per cent to 7.75 per cent with a view to boost growth.
The Reserve Bank of India has directed banks to set aside more capital to cover risks on advances to realty sectors and has raised repo rate by 0.25 per cent to 7.50 per cent .
While most borrowers calculate the gain they stand to make from switching to a lower interest rate, they often fail to take into account all the costs.
'Banks are being encouraged to lend instead of parking their resources with the RBI and earn risk-free interest income,' points out Tamal Bandyopadhyay.
The bank kept cash reserve ratio unchanged at 6 per cent.
Bankers have been criticised for not passing the benefits of rate cuts
