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Tag: rbi monetary policy repo rate

  • How RBI’s repo fee hike will affect the economic system and your private finance?

    On September 30, the Monetary Policy Committee (MPC) elevated rates of interest by 50 foundation factors, as anticipated, to five.90% whereas sustaining its FY23 inflation prediction of 6.7 per cent. In August 2022, CPI inflation rose to 7.0% YoY from 6.7% in July. In addition to the US greenback’s ongoing unpredictability, ongoing financial tightening, growing inflation, and considerations of a worldwide recession within the monetary markets, these elements may need a detrimental impact on rising market economies and severely jeopardise financial prospects for improvement. In order to regulate persistent inflation, RBI will maintain working to take care of monetary stability, and it’s well-known {that a} hike in key charges ends in banks climbing their lending charges, let’s learn the way they affect one’s month-to-month EMI and financial savings.

    Speaking on the affect on the economic system, credit score demand of banks, and housing demand, Atanuu Agarrwal, Co-founder, Upside AI mentioned “Rising rates of interest are designed to slow-down the economic system, so a slowdown generally credit score demand and housing must be anticipated. In any case, credit score demand has outpaced development in deposits, so this might assist carry the 2 to parity. Upcoming festive demand might take the sting off slowing development.”

    “Expect to pay larger EMIs in your floating fee loans, which is the case for many mortgages and in time, obtain larger curiosity in your deposits. High inflation and rising deposit charges might result in comparatively decrease discretionary spends,” he further added as an impact on our finances.

    The expense of education is on the higher side, and soon the interest rates for education loans will rise along with those for other loan types. Following the RBI’s policy repo rate increase, as a result, consequently, the RBI repo rate increase would have a major effect on students. By enquiring about how higher repo rates would affect student loans Mr Ankit Mehra, CEO and Co-founder of GyanDhan said “Interest rate on loans will increase shortly. The increased rates could deter some prospective borrowers, but we don’t expect a significant drop in numbers as the increased education and living costs will result in more borrowing needs. Students with existing loans who might find the increased EMI burden difficult to manage in the light of an almost 2% increase this year should talk to lenders to adjust their loan tenures.”

    By enquiring concerning the penalties for the economic system, financial institution credit score demand, and housing demand, Hemang Kapasi, Head of Equity, Sanctum Wealth mentioned “India has all the time been a ~7-8% rate of interest economic system and with inflation, at 7% we see restricted hikes in future. At this juncture, the situation in India is such that corporates’ and households’ funds are comparatively in much better form. Corporates are sitting on the lowest leverage within the final 15 years and the very best capability utilization of 74%+ bodes properly for the CAPEX cycle. The family financial savings fee at 22% is among the many highest within the final decade regardless of which we’re seeing good demand for each housings in addition to private spending entrance. These elements make us consider that these rate of interest hikes wouldn’t have any important affect on the general demand within the economic system.”

    Because banks borrow money from the central bank when there is a scarcity of funds in order to satisfy their credit demand, customers will now have to pay more when borrowing money from banks as a result of the increase in the repo rate. Mr. HP Singh, Chairman & Managing Director, Satin Creditcare Network Limited said “The Monetary Policy Committee (MPC) of the RBI announced the new repo rate today. The Reserve Bank of India has hiked the repo rate by 50 basis points. This marks the fourth consecutive rise in the repo rate, bringing it to 5.90%. This has affected the lending capacity of all banks within the country. The RBI uses the repo rate to regulate the liquidity and cash flow in the economy. This 50-basis points hike will definitely impact the new and existing borrowers. Many banks have their interest rates linked to the repo rate. This means that with the increased repo rates, various banks would have to raise loan interest rates and EMIs. Home loans are one of the segments that will see a negative effect due to the increase in interest rates.”

    He additional added that “This will adversely have an effect on individuals with present loans, but it surely may also discourage individuals from availing of any loans until completely vital. However, this resolution has been made to curb the rising inflation. Restricting the money circulation available in the market by way of this enhance in repo fee is of utmost significance to arrest inflation. The provide chain disruption has triggered rises in on a regular basis commodities, decreasing the buying energy of individuals. The credit score demand has elevated available in the market as a result of pandemic lockdown, the results of the Russia-Ukraine struggle, and inflation. However, with the brand new hike within the repo fee, the credit score provide shall be restricted. The growing international inflation fee is a matter of nice concern. With India’s inflation fee being 7%, the worth of the forex may fall with out the intervention of the RBI to attempt to maintain it and produce it down. The RBI has raised charges by a complete of 190 foundation factors since May 2022. Bringing inflation down is among the principal focuses of the RBI at the moment with the intention to maintain the worth of the forex and serve economically weak societies.”

    Rajiv Shastri, Director and CEO NJ AMC said “The hike is alongside anticipated strains, given the stress on the forex and elevated inflation. There are combined impulses for inflation with worldwide commodity costs moderating at the same time as producers begin to go on earlier will increase as demand stays strong. However, inflation might decelerate as such hikes subdue demand, which might create room for the RBI to pause. We consider that we’re near a peak when it comes to coverage charges and the potential for additional hikes seems to be low.”

    Mr. Sandeep Bagla, CEO – TRUST Mutual Funds mentioned “While RBI has hiked rates by 50 bps, the stance still remains at the removal of accommodation. RBI has acknowledged that the policy is still accommodative. Rates would have to hike more to reach a neutral situation. Bond markets had already built in the 50 bps hike and are likely to remain range bound. In the medium term, inflation is likely to keep rates high.”

    Disclaimer: The views and suggestions made above are these of particular person analysts or private finance firms, and never of Mint.

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  • RBI hikes repo fee by 50 bps to five.90%, cuts GDP development goal to 7% for FY23

    The Reserve Bank of India on Friday raised the repo fee by 50 foundation factors (bps) to five.90 per cent to tame inflation which stays above its consolation zone.

    This is the fourth consecutive improve within the repo fee — the speed at which the RBI lends cash to banks to satisfy their short-term funding wants — since May this 12 months. It can also be the third 50 foundation factors fee hike in a row by the RBI.

    RBI had slashed the repo fee in March 2020 to assist the economic system cope with the disruptions brought on by the Covid-19 pandemic.

    The six-member Monetary Policy Committee (MPC), headed by the RBI Governor Shaktikanta Das, additionally determined to stay centered on withdrawal of lodging to make sure that inflation stays throughout the goal going ahead, whereas supporting development.

    “If high inflation is allowed to linger, it invariably triggers second order effects and unsettles expectations. Therefore, monetary policy has to carry forward its calibrated action on policy rates and liquidity conditions consistent with the evolving inflation-growth dynamics. It must remain alert and nimble,” Das mentioned whereas asserting the coverage.

    The extraordinary world circumstances that triggered the heightened inflationary strain have impacted each superior in addition to rising market economies. India is, nonetheless, higher positioned than many of those economies, he mentioned.

    The hike in repo fee was in keeping with the market expectations. This rise will end in increased EMIs for patrons.

    The MPC additionally lowered the actual gross home product (GDP) for fiscal 2022-23 to 7 per cent, from a projection of seven.2 per cent introduced in the course of the August coverage.

    The headwinds from prolonged geopolitical tensions, tightening world monetary circumstances and potential decline within the exterior part of combination demand can pose draw back threat to development.

    The inflation projection for the present 12 months was retained at 6.7 per cent.

    Speaking on the rupee, Das mentioned the motion of the home forex has been “orderly” in comparison with most different nations.

  • RBI MPC Meeting Live Updates: Repo fee hiked 50 bps to five.9%, says Shaktikanta Das

    RBI MPC Monetary Policy Review Announcement Live Updates: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Friday hiked the repo fee by 50 foundation factors (bps) to five.90 per cent with fast impact, RBI Governor Shaktikanta Das introduced.

    This is the fourth fee hike by the central financial institution on this monetary 12 months. Prior to this, the RBI had raised the repo fee – by 40 bps in an off-cycle assembly in May and 50 bps in June and August. The market consultants anticipated the MPC to boost the repo fee by 50 foundation factors (bps) on this assembly to tame the raging inflation and a falling rupee which hit an all-time low earlier this week following a strengthening of the greenback.

    The retail inflation or Consumer Price Index (CPI), which the RBI components in whereas contemplating its benchmark lending fee, stood at 7.00 per cent in August. Retail inflation has continued to stay above the central financial institution’s consolation stage of 6 per cent since January this 12 months.

    The RBI governor additional introduced that the standing deposit facility (SDF) fee stands adjusted to five.65 per cent and the marginal standing facility (MSF) fee and the Bank Rate to six.15 per cent.

    More to observe

  • RBI MPC Meeting Live Updates: Inflation has peaked and can average, says Shaktikanta Das

    RBI MPC Monetary Policy Review Announcement Live Updates: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Friday hiked the repo fee by 50 foundation factors (bps) to five.40 per cent with quick impact, RBI Governor Shaktikanta Das introduced.

    This is the third fee hike by the central financial institution on this monetary yr. Prior to this, the RBI had raised the repo fee – by 40 bps in an off-cycle assembly in May and 50 bps in June. The market specialists anticipated the MPC to lift the repo fee by at the least 35 foundation factors (bps) on this assembly.

    The retail inflation or Consumer Price Index (CPI), which the RBI elements in whereas contemplating its benchmark lending fee, stood at 7.01 per cent in June. Retail inflation has continued to stay above the central financial institution’s consolation degree of 6 per cent since January this yr.

    In his tackle, Das mentioned that the MPC vote was unanimous and mentioned that the MPC has determined to stay centered on withdrawal of the accommodative stance to verify inflation. Additionally, he introduced that the standing deposit facility (SDF) fee stands adjusted to five.15 per cent and the marginal standing facility (MSF) fee and the Bank Rate to five.65 per cent.

    In his speech as we speak, Das mentioned that the Indian economic system has been grappling with excessive inflation and added that India has been dealing with a $13.3 billion capital outflow in the previous few months.

    He famous that the monetary sector stays properly capitalised and India’s foreign exchange reserves present insurance coverage towards world spillovers.

    Speaking on progress, Das mentioned that the true GDP progress projection for 2022-23 is retained at 7.2 per cent with Q1 at 16.2 per cent, Q2 at 6.2 per cent, Q3 at 4.1 per cent and This fall at 4.0 per cent with dangers broadly balanced. However, he cautioned that there are dangers from the continued Russia-Ukraine conflict.

    Designed by Shameen Alauddin/Indian Express

    Speaking on inflation, the RBI governor mentioned that retail inflation stays uncomfortably excessive and famous that inflation anticipated to stay above 6 per cent. He mentioned that the inflation projection is retained at 6.7 per cent in 2022-23, with Q2 at 7.1 per cent; Q3 at 6.4 per cent; and This fall at 5.8 per cent, and dangers evenly balanced, on the belief of a traditional monsoon in 2022 and common crude oil value (Indian basket) of US$ 105 per barrel. The CPI inflation for Q1 of 2023-24 is projected at 5.0 per cent.

    In the post-policy press convention, Das mentioned that the Indian economic system is an island of stability regardless of two black swan occasions and a number of shocks.

    Speaking to reporters, the central financial institution chief mentioned that inflation has peaked and can average, however it’s at unacceptably excessive ranges. Speaking on the present account deficit (CAD), Das mentioned that CAD might be manageable and the RBI has the power to handle the hole. Das mentioned that the RBI has the power to finance the CAD and added that the foreign exchange reserves stay sturdy and we are going to cope with extra volatility within the change fee.

    On being requested in regards to the steep fee hikes, he mentioned {that a} 50 bps hike is the brand new regular and world central banks have lately raised their respective rates of interest by 75-100 bps. He famous that financial coverage might be calibrated, measured and nimble from right here on.

    How economists and market specialists reacted:
    Adhil Shetty, CEO at BankBazaar.com mentioned, “The rise in repo rate coupled with the inflation is going to hit new and existing borrowers hard. A 140 basis points increase in the last few months means borrowers who were paying around 6.8-7 per cent interest will now be paying 8.2-8.4 per cent. This means that even for a 20-year loan, the amount of interest to be repaid is higher than the principal. If the EMI remains constant, the tenor for a 20-year loan can go up by as much as 8 years. As most lenders would not sanction this increase in tenor, it is a given that EMIs would increase. It’s now essential to have a repayment plan as going by the EMIs alone would mean a very high interest outflow.”

     

    D.R.E Reddy, CEO and Managing Partner at CRCL LLP mentioned, “The RBI today increased the repo rate by another 50 bps to 5.40 per cent with immediate effect. With this move, the stage is set to return to pre-COVID levels with an end of the easy money era. There is absolutely zero probability of India slipping into recession. This will take the terminal rate to 5.90 per cent by the end of FY23. A normal monsoon, good crop year, easing of household inflation and de-escalation of tension between Russia and Ukraine will help keep crude prices in check.”

     

    Ravi Modani, Founder and CEO at 121 Finance mentioned, “Policy announcement is on the higher end of expected lines, reflecting the RBI’s continued focus to maintain balance between growth and stability. We are right now in a situation where there is a considerable amount of challenge Indian economy faces, specially from global macro monetary policy and political developments. Any decrease in demand due to higher borrowing cost, should be offset by rural demand coming from a very good monsoon. At the same time this might impact the earnings of Q2 for most of the businesses. However, this is a very prudent decision to tread through this phase of global uncertainties with extreme caution and optimism coming from easing of inflation and Rupee maintaining its strength.”

     

    Motilal Oswal, MD and CEO at Motilal Oswal Financial Services mentioned, “RBI in its latest MPC meeting has hiked the repo rate by 50 bps to 5.4 per cent – levels which was seen before the Covid-19 pandemic. The central bank raised the interest rate for the third consecutive month since May’22 by cumulatively 140 bps in its effort to contain inflation. Despite this sharp hike, RBI expects the inflation to remain above its comfort zone and has retained its CPI inflation forecast at 6.7 per cent for FY23. RBI expects India’s GDP growth to remain strong at 7.2 per cent in FY23. We believe, the commodity prices have cooled off including crude oil, the inflation may be peaking out. We expect RBI may not be very aggressive in its subsequent policy meets and being more data driven based on inflation numbers.”

     

  • RBI’s financial coverage assembly commences: Here’s what analysts, consultants count on

    The Reserve Bank of India’s (RBI) six-member Monetary Policy Committee (MPC) started its three-day assembly on Wednesday. The MPC, which is headed by RBI Governor Shaktikanta Das, will announce its choice on the important thing lending charges on August 5.

    It is extensively anticipated that the central financial institution will elevate its benchmark lending charges for a 3rd consecutive time to examine the spike in retail inflation. The retail inflation or Consumer Price Index (CPI) has been above the 6 per cent mark for six consecutive months until June and continues to stay a priority amid excessive crude costs.

    So far the RBI has raised the repo price twice – by 40 foundation factors (bps) in an off-cycle assembly in May and 50 bps in June. and market consultants extensively anticipate that RBI would possibly hike its benchmark lending price for the third consecutive time.

    Here’s what numerous analysts and market consultants count on from the MPC assembly:
    Rajani Sinha, Chief Economist at CareEdge mentioned, “With the softening of many commodity prices, CPI inflation seems to have broadly peaked at the current levels and expected to witness a downward movement to below 6% by Q4FY23. However, domestic inflation is still high and so is the global commodity prices, we expect RBI to continue with front-loading of rate hiking cycle. We expect 50 bps of repo rate hike in the upcoming policy and another 50-bps rate hike post that taking the terminal repo rate to 5.90% by the end of the fiscal year.”

     

    Dhruv Agarwala, Group CEO, Housing.com, PropTiger.com and Makaan.com, mentioned: “In view of the current high inflation scenario, the RBI MPC in its August meet is likely to hike the repo rate. In our estimate, it is expected to be in the range of 20-25 basis points. While other banking regulators across the world, including the Fed, are raising rates aggressively, the situation in India does not warrant that kind of approach yet. However, as suggested by the RBI in its earlier announcements, the rates would continue to be hiked in a graded manner, in upcoming MPC meets.”

     

    Mohit Ralhan, Global CEO and Managing Partner at TIW Capital Group mentioned, “The August meeting of MPC is one of the most crucial ones as the Indian economy is at a critical juncture. June marked the sixth straight month when inflation at 7.01% came higher than the upper tolerance level of RBI. RBI also needs to look at the policy rate increases in the USA, as it would want to keep the spread under control. The US Fed has already increased the policy rates by 2.25% and a further hike by 1% is expected in 2022. At home, RBI has till now increased interest rates by 0.9%. The inflation in agri-commodities around the globe is showing no signs of abetment, while the Russia-Ukraine war still continues. The continuation of supply chain issues amidst the zero covid policy of China and labor shortages in major economies have made the fight against inflation quite challenging. Therefore, a significant rate hike is likely, which may or may not happen in one shot and RBI may like to spread it over this year. A 0.35% to 0.5% hike in the next meeting looks likely followed by another similar hike later in this year if inflation continues to rage above 7%.”

     

    Ravi Modani, Founder and CEO at 121 Finance mentioned, “I feel MPC will not increase the interest rates, and this will be a balancing act to maintain the local demand, after calibrating it with the loss of potential export demand from the US reaching a recession. With good monsoons in place, they would like to maintain the domestic consumer demand. Already the WPI has eased substantially with commodity prices going down and growth in CPI seems to have plateaued for the moment. With non-US Dollar currencies being used to pay for crude, India is quite comfortable with its reserves. Only the reduced inflow of forex might be a cause of worry, especially after the Fed’s 75 bps increase, for which the recent measures of RBI to attract Indian diaspora for NRE deposits will balance it substantially. Overall, I do not see any increase and this should act as a catalyst to maintain the economic growth.”

     

    Shivam Bajaj – Founder and CEO at Avener Capital mentioned, “Two critical factors would determine MPC’s stand on rates in this meeting, whether Inflation continues to remain beyond RBI’s comfort zone and GST collections as well as PMI is looking up even after successive rates hikes by RBI in the initial part of this year which would give it confidence to continue its hawkish stand. This might align market expectations towards rate hike by around 30 bps.”

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  • RBI Monetary Policy: Repo fee unchanged at 4% for the eleventh consecutive time

    RBI Monetary Policy 2022: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) stored the repo fee unchanged at 4 per cent for the eleventh consecutive time whereas sustaining an ‘accommodative stance’, RBI Governor Shaktikanta Das introduced on Friday.

    The central financial institution governor stated that the MPC had voted unanimously to keep up the accommodative stance and added that the reverse repo fee too was stored unchanged at 3.35 per cent.

    The Marginal Standing Facility (MSF) fee and financial institution fee additionally had been stored unchanged at 4.25 p.c.

    The RBI had final revised its coverage repo fee or the short-term lending fee on May 22, 2020, in an off-policy cycle to perk up demand by chopping the rate of interest to a historic low.

    Addressing the media after the financial coverage assembly, Das stated that RBI will restore the liquidity adjustment facility (LAF) hall to 50 bps, because it was pre-Covid. MSF Rate and financial institution fee stays unchanged at 4.25 per cent.

    “The floor of the corridor will now be provided by the newly instituted standing deposit facility (SDF), which will be placed 25 basis points below the repo rate, i.e., at 3.75 per cent,” the governor stated.

    Speaking on the central financial institution’s stance, he stated “It also decided to remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.”

    Speaking in regards to the reverse repo, Das stated that the “fixed rate reverse repo (FRRR) rate is retained at 3.35 per cent. It will remain as part of RBI’s toolkit and its operation will be at the discretion of the RBI for purposes specified from time to time. The FRRR along with the SDF will impart flexibility to the RBI’s liquidity management framework.”

    The RBI slashed the expansion projection for the present fiscal to 7.2 per cent from 7.8 per cent earlier; whereas elevating the inflation forecast to five.7 per cent from 4.5 per cent.

    Speaking on the GDP, Das stated the actual GDP progress for 2022-23 is now projected at 7.2 per cent with Q1 2022-23 at 16.2 per cent, Q2 at 6.2 per cent, Q3 at 4.1 per cent and This autumn at 4.0 per cent, assuming crude oil (Indian basket) at US$ 100 per barrel throughout 2022-23.

    On the inflation fee forecast, Shaktikanta Das stated inflation is now projected at 5.7 per cent in 2022-23, with Q1 at 6.3 per cent, Q2 at 5.8 per cent, Q3 at 5.4 per cent and This autumn at 5.1 per cent.

    He added that given the extreme volatility in world crude oil costs since late February and the intense uncertainty over the evolving geopolitical tensions, any projection of progress and inflation is fraught with danger, and is essentially contingent upon future oil and commodity worth developments.

    In his speech, Das touched upon the liquidity and monetary market circumstances and stated the RBI will proceed to undertake a nuanced and nimble-footed method to liquidity administration whereas sustaining satisfactory liquidity within the system.

    “At present, liquidity management is characterised by two-way operations: through variable rate reverse repo (VRRR) auctions of varying maturities to absorb liquidity; and variable rate repo (VRR) auctions to meet transient liquidity shortages and offset mismatches. This approach will be continued,” he stated.

    How economists and market specialists reacted:
    Dhiraj Relli, MD & CEO at HDFC Securities stated “The latest RBI policy reflects hesitant hints to turn hawkish but sound dovish. The aggressive cut in GDP estimates for FY23 and sharp increase in FY23 inflation projections could mean some tightening measures going forward, reinforced by the change in stance to focus on withdrawal of accommodation. The current geopolitical events, supply chain issues and commodity price inflation are tying the hands of RBI and forcing it to gradually turn hawkish although it would like to continue with its pro growth outlook. 10 Year Gsec yields has risen to 7 per cent reflecting the concern of the street on the large borrowing program amidst the rising rates scenario.”

     

    V Ok Vijayakumar, Chief Investment Strategist at Geojit Financial Services stated “Retaining the repo rate at 4 per cent and reverse repo to 3.35 per cent, continuing with the accommodative stance on expected lines. Recognising the new reality of higher crude triggered by the war the RBI, as expected, reduced the FY23 GDP growth rate projection to 7.2 per cent from 7.8 per cent earlier and raised the CPI inflation projection for FY23 to 5.7 per cent from 4.5 per cent earlier. This is based on the assumption of crude at $100. This implies that growth and inflation can be better if crude declines sharply if the war hopefully ends early. The reverse can be true if the war aggravates and crude spikes much above $100. The Governor rightly emphasized India’s macro strengths pointing to the improvement in the external situation helped by the record exports, ample forex reserves of $608 billion and strengthening of the financial sector. A new tool introduced by the central bank is the SDF ( Standing Deposit Facility) to absorb liquidity. SDF will be the floor of the LAF corridor”

     

  • RBI Monetary Policy: Repo fee unchanged at 4% for tenth consecutive time

    RBI Monetary Policy 2022: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) saved the repo fee unchanged at 4 per cent for the tenth consecutive time whereas sustaining an ‘accommodative stance’ so long as needed, RBI Governor Shaktikanta Das introduced on Thursday.
    The central financial institution governor mentioned that the MPC had voted unanimously 5:1 to keep up the accommodative stance and added that the reverse repo fee too was saved unchanged at 3.35 per cent.

    The Marginal Standing Facility (MSF) fee and financial institution fee additionally remained unchanged at 4.25 %.
    The central financial institution had final revised its coverage repo fee or the short-term lending fee on May 22, 2020, in an off-policy cycle to perk up demand by reducing the rate of interest to a historic low.
    During the speech on the RBI’s key selections, Das mentioned that India is charting a unique course of restoration from remainder of the world and the nation is poised to develop at quickest tempo year-on-year amongst main economies as per projections by IMF. This restoration is supported by giant scale vaccination and sustained fiscal and financial assist.
    Speaking on the GDP, Das mentioned that the true GDP progress is projected at 7.8 per cent for the subsequent monetary yr 2022-23 (FY23). The RBI governor mentioned that actual GDP progress of 9.2 per cent within the present fiscal (FY22) will take the financial system above the pre-pandemic stage.
    Speaking about inflation, the RBI governor mentioned that the CPI inflation projection for the present monetary yr 2021-22 (FY22) is retained at 5.3 per cent whereas the retail inflation for the subsequent fiscal (FY23) is projected at 4.5 per cent.
    More to observe

  • RBI Monetary Policy: Repo fee unchanged at 4% for the ninth consecutive time

    RBI Monetary Policy 2021: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) saved the repo fee unchanged at 4 per cent for the ninth consecutive time whereas sustaining an ‘accommodative stance’ so long as vital, RBI Governor Shaktikanta Das introduced on Wednesday.
    The central financial institution governor mentioned that the MPC had voted unanimously 5:1 to keep up the accommodative stance and added that the reverse repo fee too was saved unchanged at 3.35 per cent.

    The Marginal Standing Facility (MSF) fee and financial institution fee additionally remained unchanged at 4.25 %.
    The RBI had final revised its coverage repo fee or the short-term lending fee on May 22, 2020, in an off-policy cycle to perk up demand by chopping the rate of interest to a historic low.
    Speaking on the GDP, Das mentioned that the projection for actual GDP progress is maintained at 9.5 per cent. However, the RBI revised its Q3FY22 GDP progress to six.6 per cent from 6.8 per cent earlier. Additionally, Q4FY22 GDP was minimize to six per cent from 6.1 per cent earlier. The actual GDP progress is projected at 17.2 per cent for Q1FY23 and at 7.8 per cent for Q2FY23.
    Speaking about inflation, the RBI governor mentioned that the FY22 CPI inflation goal is maintained at 5.3 per cent. This consists of 5.1 per cent in Q3FY22, and 5.7 per cent in Q4FY22 with dangers broadly balanced.
    Das mentioned the headline inflation would peak within the fourth quarter of the present fiscal.
    “Price pressures may persist in the immediate term. Vegetable prices are expected to see a seasonal correction with winter arrivals in view of bright prospects for rabi crops,” Das mentioned.
    In his speech, Das additionally touched upon petrol and diesel costs and mentioned that the latest cuts in taxes on petrol and diesel ought to help the buying energy of the buyer.
    He added that the federal government consumption has additionally picked up from August, offering help to the combination demand.
    How economists and market consultants reacted:
    Deepthi Mathew, Economist at Geojit Financial Services, mentioned: “The decision to keep the rates unchanged was on the expected line. Though the economy is recovering, it is early to say that it is a broad-based recovery, which still requires support from the central bank. The growth-inflation trade-off is getting prominent in the global economy. The rising inflation rate has forced various central banks to increase the pace of monetary policy normalization. However, there hasn’t been any considerable revision on the inflation forecast by RBI and maintained it at 5.3 per cent for FY22. As the favorable base effect wanes off from November ’21, we could expect some upward pressure in the inflation rate in the coming months.”
     
    Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services, mentioned: “Overall, there were no surprises in the policy today and it was broadly a non-event. Going forward, we fear that real GDP growth could be lower than the RBI projections, with inflation falling broadly in line. Along with the rising threat from the Omicron variant, *there is a possibility that a hike in reverse repo could be postponed further to April 2022. However, if growth turns out to be better than our expectations (or in line with/better than RBI projections) and Omicron threat doesn’t materialise, a 15 bps hike in reverse repo rate in Feb ’22 cannot be ruled out. In any case, the Union Budget 2022-23 will also play an important role in the next MPC meet.”
     
    Shanti Lal Jain, MD & CEO at Indian Bank, mentioned: “We welcome the much-needed move of the RBI to maintain the status quo and continue with the accommodative stance. This will continue to support economic growth while keeping inflation in check. The measures on the Digital front and easing of capital infusion norms of overseas branches will further help in the growth of the banking business. Sufficient liquidity in the system will further push the credit growth at a much faster pace.”
     
    Sandeep Runwal, President at NAREDCO Maharashtra and Managing Director at Runwal Group, mentioned, “The RBI has always taken a proactive stance to ensure liquidity in the past few months, and has continued its accommodative policy stance amid the renewed Covid threat from the Omicron variant. It is imperative that low mortgage rates would continue, at least till the end of the year. This will provide the required fuel for the growth of the economy along with the real estate industry to which several other allied sectors are linked with. We at NAREDCO have already urged the State Government to reconsider their decision and reinstate the stamp duty reduction for another year so as to encourage home buyers and invest in their dream homes.”
     
    Shishir Baijal, Chairman & Managing Director at Knight Frank India, mentioned, “The low interest rate regime has been instrumental in reviving the real estate sector in the last 6 quarters through their systematic approach. RBI’s efforts, along with other demand stimulant measures, have helped revive demand that had been languishing for close to 7 years prior to 2020. The continuance of the accommodative stance will help further the cause for the sector.”

  • RBI Monetary Policy: Repo charge unchanged at 4% for the eighth time, accommodative stance maintained

    RBI Monetary Policy 2021: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) stored the repo charge unchanged at 4 per cent whereas sustaining an ‘accommodative stance’ so long as essential to revive and maintain development and mitigate the impression of Covid-19 pandemic whereas guaranteeing inflation stays inside the goal, RBI Governor Shaktikanta Das introduced on Friday.
    The RBI governor added that the MPC’s determination was taken unanimously and knowledgeable that the reverse repo charge too was stored unchanged at 3.35 per cent. Separately, the Marginal Standing Facility (MSF) charge and financial institution charge have been additionally stored unchanged at 4.25 per cent.
    The MPC was largely anticipated to maintain the important thing repo charge unchanged. According to a current Reuters ballot, all 60 forecasters mentioned they see no change within the repo charge on October 8 and although value pressures have soared as a result of rising gas costs the RBI is simply anticipated to lift the repo charge in April-June 2022.

    This marks the eighth consecutive time that the central financial institution has maintained a establishment on coverage charge. The RBI had final revised its coverage charge on May 22, 2020, in an off-policy cycle to perk up demand by slicing rates of interest to a historic low.
    In his speech, Shaktikanta Das introduced that the central financial institution will make sure that the inflation stays inside the goal vary. He added that the choice on MPC’s coverage charge was unanimous, whereas the choice on the accommodative stance was 5:1.
    The governor knowledgeable that high-frequency indicators recommend financial exercise has gained momentum. Core inflation stays sticky. He mentioned that the July-September CPI inflation was decrease than anticipated.
    Das mentioned that India is in a significantly better place at the moment than the final MPC assembly. He mentioned that the expansion impulses are strengthening and the inflation trajectory is extra beneficial than anticipated.
    “Growth impulses strengthening, inflation trajectory favourable than anticipated; hope to sail towards normal times, due to resilience of economic fundamentals of our economy,” he mentioned.
    Speaking on the GDP development, the RBI governor mentioned that the MPC retained FY 2021-22 GDP forecast at 9.5 per cent. He additional added that the projection for Q2FY22 GDP is estimated at 7.9 per cent , Q3FY22 at 6.8 per cent and This autumn at 6.1 per cent. The actual GDP development for Q1 of FY 2022-23 is projected at 17.2 per cent.
    Speaking on inflation projection, Das mentioned that the CPI inflation is projected at 5.3 per cent for FY 2021-22 and the CPI for Q1 of FY 2022-23 is projected at 5.2 per cent.
    More to observe

  • RBI Monetary Policy: Repo fee unchanged at 4%, accommodative stance so long as essential

    RBI Monetary Policy 2021: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) saved the repo fee unchanged at 4 per cent whereas sustaining an ‘accommodative stance’ so long as essential to mitigate the impression of the COVID-19 pandemic, RBI Governor Shaktikanta Das introduced on Friday.
    The central financial institution governor stated that the MPC’s determination was taken unanimously and added that the reverse repo fee too was saved unchanged at 3.35 per cent. The Marginal Standing Facility (MSF) fee and financial institution fee additionally remained unchanged at 4.25 p.c.
    The MPC was largely anticipated to maintain the important thing repo fee unchanged. According to a current Bloomberg ballot, all 21 economists surveyed anticipated the MPC to depart the benchmark repurchase fee unchanged at 4 per cent, whereas the central financial institution was extensively anticipated to announce one other tranche of its so-called authorities securities acquisition program.

    This marks the seventh time in a row that the RBI has maintained a establishment on coverage fee. The central financial institution had final revised its coverage fee on May 22, 2020, in an off-policy cycle to perk up demand by chopping rates of interest to a historic low.

    In his speech, Das stated that the economic system is in a a lot better place as in comparison with June 2021 and added that the central financial institution will stay vigilant towards the opportunity of a 3rd wave. He stated that the MPC voted with a 5:1 majority to proceed with an ‘accommodative’ stance so long as essential to help progress.
    Speaking on the retail inflation, the RBI governor stated that the CPI inflation stunned on the upside in May and added that the worth momentum nonetheless moderated.

    Das stated that the financial exercise has advanced broadly together with the expectations of the MPC and monsoon revived after a short pause.
    He stated that the outlook for mixture demand is enhancing nonetheless the underlying circumstances are nonetheless weak and added that extra must be carried out to revive supply-demand steadiness in quite a lot of sectors.
    Speaking in regards to the Gross Domestic Product (GDP) progress, Das stated that the RBI’s projection for India’s actual GDP is maintained at 9.5 per cent for the monetary 12 months 2021-22 (FY22). The RBI hiked the primary quarter’s (Q1FY22) GDP progress to 21.4 per cent from its earlier estimate of 18.5 per cent. It additional estimated actual GDP forecast at 7.3 per cent within the second quarter (Q2FY22) vs 7.9 per cent estimated earlier, 6.3 per cent within the third quarter (Q3FY22) vs 7.2 per cent beforehand estimated and 6.1 per cent within the fourth quarter (Q4FY22) vs 6.6 per cent beforehand estimated. The actual GDP progress for Q1:2022-23 is projected at 17.2 per cent.
    Speaking on inflation, Das stated that RBI has raised the FY22 CPI forecast to five.7 per cent from 5.1 per cent estimated earlier. The RBI estimates CPI at 5.9 per cent in Q2, 5.3 per cent in Q3, 5.8 per cent in This autumn with dangers broadly balanced. The CPI inflation for Q1 FY23 is projected at 5.1 per cent.
    Explaining it additional Das stated that “Inflation may remain close to the upper tolerance band up to Q2:2021-22, but these pressures should ebb in Q3:2021-22 on account of kharif harvest arrivals and as supply side measures take effect. ”
    The RBI governor stated {that a} pre-emptive financial coverage response at this stage could kill the nascent and hesitant restoration that’s making an attempt to safe a foothold in extraordinarily troublesome circumstances.
    Speaking in regards to the Government Securities Acquisition Program, Das introduced that the RBI can be conducting two extra auctions of Rs 25,000 crore every on August 12 and August 26, 2021 underneath G-SAP 2.0.
    “We will continue to undertake these auctions and other operations like open market operations (OMOs) and operation twist (OT), among others, and calibrate them in line with the evolving macroeconomic and financial conditions,” the RBI governor stated.
    Shaktikanta Das additionally prolonged the on-tap TLTRO scheme by three months until December 31, 2021.
    Speaking in regards to the MSF, Das stated “To provide comfort to banks on their liquidity requirements, including meeting their Liquidity Coverage Ratio (LCR) requirement, this relaxation which is currently available till September 30, 2021 is being extended for a further period of three months, i.e., up to December 31, 2021.”
    How economists and market specialists reacted:
    Deepthi Mathew, Economist at Geojit Financial Services, stated: “In an expected move, MPC kept the rates unchanged and continued with the accommodative stance. Though the MPC voted unanimously to keep the rates unchanged, votes for the continuance of accommodative stance were at 5:1. It shows that the inflation debate is getting more prominent. The forecast of inflation rate for FY22 was revised upwards to 5.7 per cent from 5.1 per cent announced earlier. RBI’s assurance to conduct OMOs when needed would help to keep the bond yields in check.”
     
    Unmesh Kulkarni, Managing Director Senior Advisor at Julius Baer India, stated: “While the accommodative stance continues for now, the RBI’s higher inflation projection (compared to market expectations), along with the enhanced VRRR auctions, is likely to put some upward pressure on yields, especially at the short-end. The longer end (gilt) of the yield curve should largely remain range-bound for now, with active intervention by the RBI through a combination of OMO, Operations Twist and G-SAP. Overall, yields have already bottomed out some time back, and it will be interesting to watch RBI’s policy stance towards the end of this calendar year, with further stability in the domestic growth outlook, improvement on the vaccination front and developments around global commodity prices.”
     
    Bekxy Kuriakose, Head – Fixed Income at Principal Asset Management, stated: “We think the possibility of further rate cuts is not ruled out but for that to happen CPI inflation needs to show meaningful downward trend closer to 4 per cent which may happen towards latter part of FY 2021. Meanwhile RBI will continue with other measures to aid credit flow to needy sectors and ensure monetary transmission. While a calendar or quantum of further OMOs was not mentioned we expect OMO purchases to continue while being episodic in nature. The disappointment of no rate cut may lead to a selloff of 5 to 10 bps in the near term. We advise investors to maintain a balanced asset allocation within debt funds with short term debt funds being the preferred category.”
     
    Nitin Shanbagh, Head – Investment Products at Motilal Oswal Private Wealth, stated: “From investors point of view, focus should be towards investing in high quality roll down accrual strategies through a bar-bell approach viz. combination of short term and long term maturity strategies with weighted average portfolio average maturity of 4-5 years. For yield enhancement, investors can also consider investing upto 25 per cent in well researched REITs, InVits, select high yield MLDs, etc.”
     
    Kaushal Agarwal, Chairman at The Guardians Real Estate Advisory, stated: “The RBI and especially the MPC are to be commended for maintaining an accommodative stance for the seventh consecutive time now. Their approach towards tackling the situation created by the pandemic and steps taken to help revive the economy will go down in history as being one of the finest. The reduction in stamp duty charges in some parts of the country along with the all-time low housing loan rates have given the much-required fillip to sales activity in the last few quarters. The expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels.”
     
    Nish Bhatt, Founder & CEO at Millwood Kane International, stated: “As expected the MPC voted to keep the key rates and the policy stance unchanged. The decision to extend the on-tap TLTRO scheme once again till December will maintain ample liquidity and support growth. RBI’s view of current high inflation being largely transitory in nature and its focus on growth is a big positive. The economy is showing signs of revival, it needs policy support. RBI’s estimate of inflation softening post-Q2 indicates that the current policy may continue for few quarters, with a beginning of normalization by end of FY22. The policy has been largely growth-oriented, supporting easy liquidity. It will help attain the high growth as estimated by the central bank – 9.5 per cent and 17.2 per cent for FY22 and FY23 respectively.”