Home / Industry / Banking /  RBI Monetary Policy: Interest rates unchanged, GDP growth forecast lowered

NEW DELHI : The Reserve Bank of India (RBI) released its fifth bi-monthly monetary policy statement for 2019-20 in which the Monetary Policy Committee (MPC), led by Governor Shaktikanta Das, decided to keep the policy repo rate unchanged at 5.15%. In 2019, the RBI has cut repo rate by 135 basis points so far to a nine-year low of 5.15%. Analysts were expecting another 25 basis points cut.

Here are Live Updates from RBI's MPC meeting:

-The RBI said it is against any kind of private digital currency as currency is a soveriegn function. The apex bank, has however started initial discussions to launch its own digital currency. "If the technology evolves then the RBI will certainly look into it," Shaktikanta Das said.

-On HDFC Bank's technical glitch, which affected netbanking and app services, the apex bank said its team has gone to find out the reason and what directions can be given in the case.

-On the PMC Bank issue, Das said valuers are assessing the realisable values of assets mortgaged by the companies and other assets identified by the ED and economic offences wing.

-Das said the policy rate decision was a "temporary pause" in the interest rate cutting cycle and the MPC will be better placed to decide on it in February after more data comes in and the government brings out its Budget for 2020-21.

-Das said the RBI doesn't want to reduce the MPC rate again and again but wait for maximum impact.

-RBI Governor Shaktikanta Das said he is not worried about fiscal deficit, but wants greater clarity on counter-cyclical fiscal measures.

-Ranjan Chakravarty, Economist and Product Strategist at Metropolitan Stock Exchange, said this is tantamount to an implicit rate hike - premature and unwarranted because this is a demand-side reaction to supply-side retail inflation. "Growth is left unaddressed. At least the saving grace is that no ammunition was expended on piecemeal measures. We still hope that the growth priority prevails and a substantial easing is brought about in the next policy cycle," he said.

-RBI governor on fears of job cuts: "There is no such fear".

-Stock markets erased all the gains and fell led by drop in banking stocks on Thursday after Reserve Bank of India unexpectedly maintained its key rates.

-The Reserve Bank of India will not allow any NBFC to collapse, Shaktikanta Das said adding that they know which NBFCs are vulnerable and are being monitored.

-"We have taken measures to ensure that credit flow increases from banks to NBFCs," Das said.

-Monetary policy transmission by lenders has been full and reasonably swift: Shaktikanta Das.

-Steep telecom tariff hike can have some impact on core inflation: Governor Shaktikanta Das.

-Both the RBI and government are working in co-ordination to achieve growth.

-Shaktikanta Das said the timing of rate cut is also important and one must allow time for measures, which have already been taken, to play out.

-Das said RBI expects inflation to moderate. On growth prospects, he said, "We have some green shoots, things are improving."

-RBI Governor Shaktikanta Das said the forthcoming union budget will provide better insight into further measures to be undertaken by the Government and their impact on growth.

-The RBI has also announced that it will launch a new type of prepaid payments instrument (PPI) which can be used only for purchase of goods and services up to a limit of 10,000.

-Transmission of interest rates is expected to improve soon as the share of base rate loans, interest rates on which have remained sticky, declines; and MCLR-based floating rate loans, which typically have annual resets, become due for renewal, RBI said.

-As against the cumulative reduction in the policy repo rate by 135 bps during February-October 2019, transmission to various money and corporate debt market segments ranged from 137 bps (overnight call money market) to 218 bps.

-RBI has lowered its real GDP growth forecast for 2019-20 from 6.1% in the October policy to 5%.

-RBI MPC report said data on corporate finance and on projects sanctioned by banks and financial institutions suggest some early signs of recovery in investment activity, though its sustainability needs to be watched closely.

-RBI said although inflation is rising in the near-term, but it is likely to moderate below target by the second half of FY 2020-21.

-All members of the MPC – Dr. Chetan Ghate, Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra, Shri Bibhu Prasad Kanungo and Shri Shaktikanta Das – voted in favour of the policy decision.

-Explaining the rationale behind not touching the repo rate, the MPC said there is monetary policy space for future action. "However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture. Accordingly, the MPC decided to keep the policy repo rate unchanged and continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target," the RBI said.

-In its report, the MPC has noted that economic activity has weakened further and the output gap remains negative.

-The RBI has increased the CPI inflation projection to 5.1-4.7% for the second half of the current fiscal year and and 4.0-3.8% for the first half of the next fiscal year 2020-21.

-The MPC said monetary transmission has been full and reasonably swift across various money market segments and the private corporate bond market.

-These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth, the RBI said.

-The MPC has decided to continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target, RBI said.

-India's economy is set for a modest recovery after a loss of momentum, as reforms in taxation, business regulations and steps to upgrade infrastructure start to bear fruit, the Organization for Economic Cooperation and Development (OECD) said in a report on Thursday.

-Interest rate moves by central banks across a group of 37 developing economies showed a net 8 cuts last month after a net 9 cuts in October.

-Australian brokerage Macquarie said in a report that the RBI may pause to see how the cumulative cuts transmit through the economy.

-RBI needs to prod banks to lower lending rates and perhaps manage market yields.

-In its last bi-monthly policy statement, the RBI had maintained "accommodative stance" and cut its key lending rate to 5.15%.

-Easing of monetary policy could allow banks to reduce their lending rates and help both consumers and the industry to get cheaper finance.

-The RBI's policy statement is also expected to comment on transmission of interest rates as banks have passed on only a fraction of rate cuts to consumers.

-Bloomberg News surveyed 34 economists, a majority of whom expect a 25 bps rate cut, with the rest expecting reductions of 15 basis points to 50 basis points.

-The RBI has lowered its growth forecast for the current fiscal year four times already, with the latest revision in October pegging expansion at 6.1%.

-The resolution of the MPC will be released at 11.45 am today.

-Eight out of 10 economists and treasury heads surveyed by Mint expect a 25 bps rate cut. The RBI is also expected to maintain an accommodative stance.

-RBI's MPC meeting began on Tuesday and ends today.

-RBI Governor Shaktikanta Das, who took over the role after Urjit Patel's resignation last year, completes one year in office next week.

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