RBI to issue revised circular on stressed assets, says Shaktikanta Das10 min read . Updated: 04 Apr 2019, 02:27 PM IST
- RBI cuts repo rate by 25 bps
- The MPC also decided to maintain the neutral monetary policy stance
The Reserve Bank of India (RBI) is today cuts its repo rate, or the rate at which it lends to banks, by 25 basis points to 6%. The MPC also decided to maintain the neutral monetary policy stance.
Indian markets were flat in noon trade after Reserve Bank of India, as expected, cut the repo rate by 25 basis points while keeping its monetary policy stance "neutral" despite subdued inflation.
Catch all the latest updates in our Market LIVE blog
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said: “A key takeaway from the policy is the projection of benign inflation for FY2020. Since the GDP growth rate for FY2020 has been lowered in this benign inflation scenario, one can expect more rate hikes probably two more this year. The stance has been maintained at neutral perhaps in the context of the rising crude price and concerns regarding a below normal monsoon."
The RBI also lowered its GDP growth outlook for 2019-20. RBI expects GDP growth at 7.2% for 2019-20, lower than its February projection of 7.4%. Read the full story here
CPI inflation revised downwards to 2.4 percent in Q4 of FY19
2.9-3.0 percent in the first half of fiscal year 2019-20
3.5-3.8 percent in the second half of FY 2019-20
Committee to be constituted on development of housing finance securitisation market
RBI governor Shaktikanta Das says they are waiting for the Bimal Jalan committee report and that the deliberations are at an advanced stage.
~Powers of RBI under section 35 AA of the Banking Regulation are not in doubt at all.
~The RBI may look at issuing revised circular for resolution of stressed assets
We will bring out some guidelines to ensure effective transmission of rates, says RBI governor Shaktikanta Das.
With the RBI cutting the benchmark repo rate, retail consumers expect a reduction in EMIs. But that may not happen anytime soon. There are two reasons for this. Read full story here
Anticipating the seasonal tightening of liquidity at end-March, the Reserve Bank conducted four longer term (tenor ranging between 14-day and 56-day) variable rate repo auctions during the month in addition to the regular 14-day variable rate term repo auctions
Shaktikanta Das, Ravindra Dholakia, Michael Debabrata Patra & Pami Dua voted in favour of the decision to reduce the policy repo rate by 25 basis points while Viral Acharya & Chetan Ghate voted to keep the policy rate unchanged
Reserve Bank conducted long-term foreign exchange buy/sell swaps of US$ 5 billion for a tenor of 3 years on March 26, 2019, thereby injecting durable liquidity of ₹34,561 crore ( ₹346 billion) into the system.
With the RBI cutting the benchmark repo rate, retail consumers expect a reduction in EMIs
RBI to come up with a framework to check customer's complaint regarding failed transactions
RBI to benchmark India's payment system
RBI proposes measures to develop housing finance securitisation markets
Export growth remained weak in January and February 2019 mainly due to exports of petroleum products decelerating in response to a fall in international crude oil prices. Among non-oil exports, engineering goods, chemicals, leather and marine products recorded either sequentially
lower or negative growth. As in the case of exports, lower international crude oil prices downsized the oil import bill.
GDP projection for 2019-20 is kept at 7.2% , earlier projection was of 7.4%.
Projected CPI inflation for 2018-19 is revised to 4.7-5.1 percent in H1 FY19 and 4.4 percent in H2, including the HRA impact for central government employees, with risks tilted to the upside.
RBI has said that GDP growth is projected to strengthen from 6.6 percent in 2017-18 to 7.4 percent in 2018-19.
Dr. Chetan Ghate, Dr. Pami Dua, Dr. Michael Debabrata Patra, Dr. Viral V. Acharya and Shaktikanta Das voted in favour of the decision to maintain the neutral stance of monetary policy.
Dr. Ravindra H. Dholakia voted to change the stance from neutral to accommodative.
The MPC also decided to maintain the neutral monetary policy stance.
Central bank cuts repo rate by 25 bps
One among the ten economists was of the view that the MPC could go for a reduction of 50 basis points. A 50 basis points repo rate cut by RBI would mean that there is a higher room for the banks to reduce their interest rates.
The market is expecting a cut in policy rates by 25 basis points ahead of the general elections, along with a change in policy stance to accommodative from neutral.
Of the 10 economists and treasurers polled by Mint, nine expect the monetary policy committee to cut the benchmark repo rate by 25 basis points to 6%, as inflation continues to undershoot the central bank’s targeted trajectory and growth continues to be hit due to a global slowdown
Indian rupee weakened marginally against US dollar ahead of the key Reserve Bank of India's bi-monthly policy today due at 11.45 am. At 9.08 am, the rupee was trading at 68.54 a dollar, down 0.16% from its previous close of 68.43. The home currency opened at 68.54 a dollar.
Declining growth is a matter of serious concern due to a fall in employment generation and slowdown in industrial activity. India’s gross domestic product (GDP) growth slowed to a five-quarter low of 6.6% in the December quarter and is expected to further slow to 6.4% in the March quarter. Bank treasurers and economists polled by Mint are unanimous in their view that the MPC will pare down their forecast to 7-7.25% for 2019-20. Goldman Sachs, however, believes there will be some pick-up in growth over the course of this year, and forecast real GDP growth to increase from 7.1% in 2018-19 to 7.5% in 2019-20.
The primary objective of RBI's monetary policy is to maintain price stability while keeping in mind the objective of growth. All rate decisions of the RBI with respect to the repo rate are data driven.
The market will watch out for commentary from RBI governor Shaktikanta Das on the 12 February circular which was struck down by the Supreme Court, citing that the central bank acted beyond its powers. In the coming days, the RBI is expected to come out with new rules on debt restructuring framework. Any remarks on the dollar-rupee swaps that the central bank had announced to infuse liquidity into the market will also be closely watched. The market will also look for the governor’s comments on monetary policy transmission and whether enough has been done by banks to pass on the rate cuts.
India's services sector activity eased in March with slowest pace of output growth in six-months due to a slower expansion in new work, leading to weakest rate of hiring since last September, a monthly survey shows. All eyes are on RBI policy now
Director General of CII Chandrajit Banerjee said the inflation trajectory has remained benign which further warrants a reduction in interest rate.
"In view of the visible signs of a growth slowdown in the second half of 2018-19, it is requested that the RBI should reduce the repo rate by at least 25 basis points in the upcoming policy and maintain a softening trend in monetary policy," he said.
"It is likely that there could be another 25 basis-point rate cut later in the year, but that would be dependent on inflation and growth data. In addition, the central bank will keep an eye on the post-elections budget, monsoons and oil prices," PFB Shanti Ekambaram, President (Consumer Banking) at Kotak Mahindra Bank said
As a retail consumer, a falling rate impacts you in two different ways. If you are a depositor, the new deposits you make earn a lower rate and it means lower returns. However, as a borrower, a downward revision of interest rate would bring down your interest outgo in the near future. Mint decoded
The expectation of a rate cut is based on a lower inflation rate as well as slower growth in the economy. The consumer price index-based inflation has remained within the RBI’s 4% target for over 6 months and is further expected to remain within the target range at least for the next few months.
The market is expecting a cut in policy rates by 25 basis points ahead of the general elections, along with a change in policy stance to accommodative from neutral. Mint takes a look at the five things that could be on the rate-setting committee’s radar. Read the full story here
The central bank could also tweak its growth forecast in the April policy. RBI had projected GDP growth for 2019-20 at 7.4 percent.
Core inflation has remained above 5 percent, leading to economists calling for a more cautious outlook by the MPC
The Supreme Court on Tuesday quashed RBI's 12 February circular that had set strict norms for bad loan resolution. The RBI circular directed banks to refer defaulters to bankruptcy courts if they were unable to find a resolution plan within 180 days for stressed accounts where the outstanding amount was more than ₹2,000 crore. Read full story here
Stock market benchmark Sensex struggled today while 10-year bond yields fell ahead of the RBI policy announcement. The Sensex was down about 40 points. The RBI is expected to cut rates for the second consecutive time this year, a Reuters poll showed. "Markets have already priced in a 25-basis-point cut, so now it will depend on the tone of the policy," said Neeraj Dewan, director with Quantum Securities. "If RBI cuts 25 bps and signals further rates cuts down the line this year, it would be seen as positive for the markets."
RBI is also likely to announce a few measures to address the liquidity concerns. The street is also expecting a change in stance from neutral to accommodative in this policy.
This will be the last RBI monetary policy announcement before the general elections in India. The six-member MPC headed by Governor Shaktikanta Das will probably reduce the repurchase rate by 25 basis points to 6 percent on Thursday. according to experts.
The Monetary Policy Committee of the Reserve Bank of India will announce its first bi-monthly monetary policy statement for 2019-20 at 11.45 am. Thereafter, the top management of the RBI with the media. The interaction will be held from 12.00 noon to 12.45 pm. The top management of the RBI will also interact with researchers/analysts between 3 pm and 3.45 pm.