RBI goes with official data: Shaktikanta Das on the data row
Governor Shaktikanta Das Thursday said the Reserve Bank goes with the official statistics while making its assessments on the economy and formulation its policy responses.
A group of over 100 economists had gone public with their reservations on the GDP and other key data prints last month in the light of the frequent revisions in the way the numbers are computed. Das, the bureaucrat-turned-central banker, told reporters that the RBI goes with the official statistics prepared by the Central Statistics Office (CSO).
Rohit Poddar, Joint Secretary, NAREDCO West and Managing Director, Poddar Housing and Development ltd
The actual inflation has stayed below than projected since February so there was a space for a further cut down in the rates. This is an election year and we can expect transient policies by the authorities due to the ambiguity over the possible policy changes by the newly elected government. This rate cut will affect the buying sentiments in a roundabout way as it is likely to make home loans cheaper. It will be a buoyant Gudipadwa for the sector
What is surprising is the logic behind retaining the ‘neutral policy stance’ even while announcing the second consecutive rate cut. A glance at the policy document clearly tells us that policy is now tilted, a least in the near term, towards a growth supportive stance. The MPC has outlined a benign inflation stance and a struggling growth scenario, indicating a further rate cut. There was an expectation that MPC will change the stance to ‘accommodative’ from neutral in Thursday’s policy. The continuance of neutral stance is a tad perplexing
Khushru Jijina, MD, Piramal Capital and Housing Finance on RBI policy
It is necessary to resurrect India’s consumer demand and economic growth before a synchronous downturn in advanced economies heighten market volatility. Today’s rate cut and moderation in liquidity coverage ratio coupled with recent instances of liquidity injections indicate that RBI is cognizant of these risks. These measures would certainly help ease liquidity and improve access to cheaper credit by India Inc as well as retail consumers. The focus to align the Indian housing finance securitisation market, as well as the secondary market for corporate loans with international best practices as announced today, will essentially deepen these markets and ensure better price discovery. We look forward to the detailed notes on RBI’s decision to allow Non-Deposit taking NBFCs to apply for Authorised Dealer licenses which is expected to expand the forex market
Rajni Thakur, Economist, RBL Bank
RBI has held on to its gradualist approach in choosing to cut REPO rate by 25bps and maintaining neutral stance. The two key risk events for inflation trend in the year ahead - monsoons and elections, cloud the near term inflation outlook and warrant continued data dependency. The forward guidance for growth and inflation remains mixed and indicate shallow cuts here and there and not a cut cycle for now. At this point, RBI seems to be more focussed on the efficacy of rate cut and its transmission to the end borrowers and we expect to see more action on the liquidity front than rates in the current cycle.
RBI decreasing the repo rate by 25 basis points is a boon to the sector. This might quicken the pace on both private consumption and private capital expenditure. Furthermore, it is imperative for banks to reduce the lending rates and ensure that the home loan borrowers reap the benefits of this move. The rate reduction will also provide the much-needed stimulus to build upon the various initiatives announced by the Government about reviving the demand in the realty sector in an affordable manner.
The highlight of Thursday’s policy, however, is the warning on slowing growth. Growth projections have been scaled down. The statement said, “The MPC notes that the output gap remains negative and the domestic economy is facing headwinds, especially on the global front. The need is to strengthen domestic growth impulses by spurring private investment which has remained sluggish,” This assessment hits the bull's eye and sends a clear message to the fiscal authorities on what is wrong on the growth.
Cut by 25 BPS, a welcome move for real estate sector: Shishir Baijal, Chairman & Managing Director, Knight Frank India
“We are delighted with the second consecutive rate cut announced today which ushers an era of falling interest rate regime. We hope that the reduction in rate are passed on by the banks to the home buyers. Lower interest rates, along with the recent reduction in GST rates for under construction properties, should provide the fillip to end user demand. The real estate sector has been looking forward to such stimuli to boost sales velocity.”
Shaktikanta Das says RBI to issue revised NPA circular soon
Governor Shaktikanta Das Thursday said the Reserve Bank will shortly come out with a revised circular for bad loan resolution, after its 12 February, 2018 circular was quashed by the Supreme Court.
The Supreme Court had Tuesday declared the one-year-old circular as "ultra vires", in response to a petition by stressed borrowers.
Speaking to reporters at the customary press conference after the announcement of the policy review, Das said the RBI will issue the revised circular for resolution of stressed assets without "undue delay".
“While the RBI has highlighted the upside risks to inflation, on account of El-Nino, food prices and fiscal situation, I think the tone is largely dovish. If we see the Congress party’s manifesto, it is a fiscal-expansionary policy, and even for the incumbent government, there is an emphasis to address rural distress, the unemployment situation, so these will have some fiscal implications. Whether the Goods and Services Tax collection will stabilise remains to be seen, but prima facie the fiscal situation will remain a concern irrespective of which government comes to power.
If inflation continues to undershoot the 4 percent level, a rate cut of 25 to 50 bps cannot be ruled out in the next 12 months.”
Indranil Pan, chief economist, IDFC First Bank, Mumbai
“I’m happy to see the RBI is not toeing the market line because markets were expecting a much more dovish tone. They have kept inflation balanced even though their forecast is well contained within the 4 percent trajectory. We need to watch out how the monsoon pans out. The real issue is when food prices will actually reverse, we’ll have to see if the trigger for that would be a lower monsoon. This is something we must factor in before the MPC moves next.
My bet is that the next meet can be a miss from the RBI, unless you see a downside to the inflation trajectory. If inflation continues to rise gradually then the RBI would possibly stay on hold.”
Joseph Thomas, Head, Research, Emkay Wealth Managment
“The RBI has adopted a very sensible and pragmatic approach by cutting the repo rate by 0.25 percent while keeping the policy stance neutral. It takes cognizance of the likelihood or potential for inflationary pressures emerging from food prices and fuel prices, and also fiscal pressures from the large government borrowing programme. Liquidity management through OMOs, repos and also the occasional currency swaps would help a somewhat better propagation of the impact of rate modifications to the lower levels.”
Parth Mehta, Managing Director, Paradigm Realty
"The MPC (Monetary Policy Committee) statement of having a 25bps cut is something the industry was expecting and which was currently needed in order to boost liquidity and investment cycles as few data points like IIP and car sales numbers which came out recently have been timid. One of the major reasons RBI could give a go-ahead to the cut was because the Inflation was in check giving them headroom to accommodate cut. This rate cut shall help the borrowing rates related to construction finance getting lowered, as well as the home loan rates easing out bringing back interest levels in property buyers with already lowered GST as buying sentiment booster. We also believe that if the inflation continues to be stable then we can expect another rate cut in the next MPC meeting to revive consumer spending and restore economic growth.”
Rate-sensitive stocks show mixed trend post RBI policy announcement
Interest rate sensitive stocks - banking, realty and auto - witnessed mixed trend Thursday following the RBI's rate-cut announcement.
Following the announcement, among the BSE Auto pack, Hero MotoCorp surged 1.75 per cent, Cummins India 1.27 percent, Tata Motors 0.92 percent, Bajaj-Auto 0.83 percent, Maruti 0.79 percent and TVS Motor 0.75 percent. Meanwhile, some stocks in BSE Auto index was also trading in the negative territory including Bosch Ltd down 0.92 per cent, Eicher Motor 0.55 percent, M&M 0.36 percent and Bharat Forge 0.28 percent.
The BSE auto index was quoted at 19,241.02, higher by 77.92 points or 0.41 percent. From bank index, Axis Bank gained 0.25 percent, Federal Bank 0.21 percent, State Bank of India 0.11 percent and Bank of Baroda 0.08 percent.
Overall credit growth not broad-based, to MSMEs it's muted: Shaktikanta Das
Even though the headline credit demand is growing at a healthy 14 percent, Reserve Bank governor Shaktikanta Das Thursday said it is not broad-based while those to MSMEs have been muted so far.
Addressing the customary press conference after the monetary policy review, Das said credit growth to the critically important micro, small and medium enterprises sector remains "muted".
As hoped for, the RBI has reduced the repo rate by another 25 basis points. Back-to-back repo rate cuts by the RBI are indeed the perfect start to a new financial year, resulting in overall reduction of 50 basis points since February 2019. The repo rate now stands at 6% - returning to the same level as in April 2018. This will augur well for the Indian real estate sector and keep the momentum going in the coming year.
As it is, the sector already saw an uplift in homebuyer sentiment due to the multiple sops offered by both the Government and the RBI in just the first three months of 2019. These measures have contributed to a 12% increase in housing sales in Q1 2019 across the top 7 cities.
The RBI has done its part by slashing the repo rates. The onus is now on the banks to concurrently reduce home loan rates further, thereby encouraging more fence-sitters to take purchase decisions and giving another boost to the real estate sector.
As expected, the MPC has chosen to mark the first bi-monthly monetary policy of this fiscal year with a token 25 bps rate cut. At a time growth is slowing and retail inflation staying low, this was the logical policy response from the panel. But will the 25 bps rate cut benefit the consumers? Banks might not be too keen to cut rates in a big way when demand is still low and fearing that profit margins will be impacted in the event of significant lending rate cuts.
RBI to take necessary steps, including revised circular for quick resolution of NPAs
RBI will take necessary steps, including revised circular for quick resolution of NPAs, RBI governor Shaktikanta Das said after the Supreme Court struck down 12 February order. He added that the RBI will issue a revised circular for NPA resolution without much delay.
Cannot elaborate on SC order on stressed assets, says RBI governor
The governor said that the MPC has considered all upsides and downside in the current macro situation. "It is a democratic right of any person to challenge any institution or individual in a court of law and RBI is not an exception to this. As I have reiterated in my press conference, we are taking wider stakeholder decisions. He added that powers of RBI under section 35 AA of the Banking Regulation are not in doubt at all.
Highlights of RBI monetary policy
Following are the highlights of the first bi-monthly monetary policy announced by the RBI on Thursday:
* Short-term lending rate (repo) reduced by 25 bps to 6 pc;
* This is second back-to-back rate cut;
* RBI maintains Neutral stance on the monetary policy;
* Four out of six MPC members voted in favour of rate cut;
* GDP growth projection lowered to 7.2 pc for 2019-20;
* RBI revises downward retail inflation estimate to 2.4 pc in Q4 FY19.
* MPC notes output gap remains negative and domestic economy facing headwinds;
* Next monetary policy statement on 6 June.
RBI to set up task force on the development of secondary market for corporate loan
The central bank has decided to hold further consultations with stakeholders and work out an effective mechanism for transmission of rates. The central bank will put in place a framework on the turnaround time for resolution of customer complaints and compensation framework across all authorised payment systems by the end of June 2019.
'Reserve Bank will watch the evolving macroeconomic situation and act when required'
RBI governor Shaktikanta Das says that the Reserve Bank will watch the evolving macroeconomic situation and act when required. "We will constitute a committee on the development of housing finance securitisation market in India", he said.
The bond yields have eased in some advanced economies: RBI governor
RBI governor Shaktikanta Das says that there is a further loss of pace in global economic activity since February policy meet. The bond yields have eased in some advanced economies and slipped to negative territories, Das said. Manufacturing growth is slowing down while investment demand is subdued, says RBI governor. Reduction in input price pressures among manufacturing firms is seen, he said. Fiscal situation at the general government level requires monitoring, Das added.
There is a slowdown in global economies: RBI governor
There is a slowdown in global economies, says Das. There is also an improvement in business sentiments. The housing finance committee will be submitting a report by 20 August, said the governor. He said the moderation of growth in the global economy might impact India’s exports.
RBI governor Shaktikanta Das says FY20 GDP seen at 7.2%, with risks evenly balanced
Das said the MPC reviewed the macroeconomic development and outlook over the course of the last two days and voted 4:2 in favour of 25bps.
Stocks come down sharply. PSU bank index top loser
Following RBI MPC rate cut announcement, bank nifty came down a half percent. Public sector bank index is the top loser. Private bank index is down 0.67 percent now.
Four out of six MPC members vote for rate cut, other two favour no change in repo rate: RBI
Pami Dua, Ravindra Dholakia, Michael Debabrata Patra and RBI governor Shaktikanta Das voted in favour of the decision to reduce the policy repo rate by 25 basis points. Chetan Ghate and Viral Acharya voted to keep the policy rate unchanged.
RBI has revised downward retail inflation estimate to 2.4 pc in Q4 FY19, 2.9-3 pc in H1 FY20 and 3.5-3.8 pc in H2 FY20.
MPC keeps the stance unchanged at neutral
GDP growth for 2019-20 is projected at 7.2 percent, in the range of 6.8-7.1 percent in H1FY20 and 7.3-7.4 percent in H2 with risks evenly balanced. The
RBI Monetary Policy Committee led by RBI governor Shaktikanta Das will announce its key decisions on policy rates shortly.
There may not be a rate cut: Kaushik Das, economist, Deutsche Bank
Das said he expects RBI to cut the rate by 25 bps. "There may not be a rate cut. For all you know, it may be accommodative and give a 25 bps. But the market will expect a 50 bps rate cut. Brent is flirting with $70 a barrel. By the month of May, India may not be able to buy oil from Iran. Skymet has indicated that monsoon could be longer. So why should RBI be dovish?"
Inflation trajectory warrants a reduction in interest rates: CII
Director General of CII Chandrajit Banerjee said the inflation trajectory has remained benign which further warrants a reduction in interest rates.
"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.
Banerjee further said that the rate cut should be effectively transmitted to banks, a reduction in the cash reserve ratio (CRR) is also recommended so that it frees up banks cash for lending purposes.
First bi-monthly monetary policy of 2019-20
RBI governor Shaktikanta Das held meetings with stakeholders including industry bodies, depositors association, MSME representatives and bankers.
According to industry estimates, inflation is well below the RBI's mandate of 4 per cent and hence it should cut the repo rate (rate at which RBI lends to banks) to boost economic growth. A back-to-back cut in interest rate would provide relief to borrowers in the election season, experts say. According to ratings firm ICRA, the RBI could go for a 25 bps rate cut in the meeting of the monetary policy committee.
Rupee slips 25 paise to 68.66 vs USD in early trade
The rupee depreciated by 25 paise to 68.66 against the US dollar in early trade Thursday ahead of the Reserve Bank of India's policy decision and foreign fund outflows.
At the Interbank Foreign Exchange, the rupee opened on a weak note at 68.56 then fell further to 68.66 against the US dollar, showing a decline of 25 paise over its previous closing. The local unit, however, pared some losses and was quoted at 68.62 against the American currency at 0930 hrs. The rupee had surged by 33 paise to close at 68.41 against the US dollar Wednesday.
Sensex, Nifty start on a cautious note ahead of RBI policy outcome
Domestic equity benchmarks opened on a cautious note Thursday ahead of the outcome of Reserve Bank of India's first bi-monthly monetary policy review for fiscal 2019-20.
The BSE gauge Sensex was trading a tad above the psychological 39,000-level in early deals, up 24.13 points or 0.06 per cent at 38,901.25. The 30-share index had settled 179.53 points, or 0.46 per cent lower, at 38,877.12 in the previous session.
Analysts expect a cautious approach ahead of polls
Some analysts believing the country’s weakening economic growth and subdued inflation outlook warrant a larger reduction.
Most analysts expected RBI MPC to take a cautious approach given uncertainty over who will lead the government after the coming election and what their fiscal policy will be.
Economists call for at least 25 bps rate cut
A panel of economists, including former Chief Economic Adviser Arvind Virmani, called for at least 0.25 percentage point rate cut in the RBI's first monetary policy of the current fiscal to be unveiled on Thursday.
Virmani said that it is for the RBI to understand that the real interest rate in India right now is very high.
RBI monetary policy LATEST updates: Reserve Bank Governor Shaktikanta Das Thursday said the central bank will soon come out with revised circular for effective resolution of stressed assets in the backdrop of the Supreme Court order.
Even though the headline credit demand is growing at a healthy 14 percent, Reserve Bank governor Shaktikanta Das Thursday said it is not broadbased while those to MSMEs have been muted so far.
Shaktikanta Das said that that powers of RBI under section 35 AA of the Banking Regulation are not in doubt at all.
The Reserve Bank Wednesday cut the retail inflation forecast to 2.9-3 percent for the first half of current fiscal, mainly due to lower food and fuel prices as well as expectation of a normal rainy season.
RBI governor Shaktikanta Das says that the Reserve Bank will watch the evolving macroeconomic situation and act when required.
The Reserve Bank of India’s Monetary Policy Committee has cut the key repo rate by 25 basis points to 6 percent amid low inflation.
Some analysts believe the country’s weakening economic growth and subdued inflation outlook warrant a larger reduction.
Equity benchmarks tripped between gains and losses on Thursday morning as investors waited for the Reserve Bank of India (RBI) to release its policy statement later during the day.
At 10:15 am, the BSE Sensex was down 25 points at 38,852 while the NSE Nifty 50 slipped 5 points to 11,639. But most sectoral indices were in the green with tiny margins. Among the early gainers were Indiabulls Housing Finance, Bharti Aitel, Hero MotoCorp, UltraTech Cement and Titan. However, HCL Tech, Wipro, Hindalco, Bharat Petroleum and Tata Steel floated in the negative zone.
The RBI is likely to cut its policy interest rate by 25 basis points on Thursday, despite some analysts believing the country’s weakening economic growth and subdued inflation outlook warrant a larger reduction.
The RBI’s six-member monetary policy committee (MPC) began its three-day review on Tuesday, and most analysts expected it to take a cautious approach given uncertainty over who will lead the government after the coming election and what their fiscal policy will be.
Representational image. Reuters.
Campaigning for votes, political parties have been promising dole-outs including direct cash payments to poor people if they win power, stoking potential inflation fears.
The inflation outlook could also be upset by the perennial risk of sharply higher food prices if the monsoon season rains disappoint.
With that in mind, more than 85 percent of the nearly 70 economists polled by Reuters expected the RBI to cut its benchmark lending rate, the repo rate, by 25 basis points to 6.00 percent on 4 April.
Yet, India’s debt market appear to have priced in a 50 basis-point cut.
Trading at 5.90 percent, the one-year interest rate swap works out at 5.75 percent on a daily basis, putting it 50 basis points below the current repo rate, according to rate derivative dealers.
Asian markets also traded with mixed trends note after witnessing a rally to six-month high. Reports said the ongoing trade deal between the United States and China will give Beijing until 2025 to meet commitments on commodity purchases and allow full foreign ownership for American companies operating in China as a binding pledge.
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