RBI Monetary Policy August 2019: Governor Shaktikanta Das says will ensure there is sufficient liquidity available for economy

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RBI Monetary Policy August 2019: Governor Shaktikanta Das says will ensure there is sufficient liquidity available for economy
  • 13:14 (IST)

    'Additional incentives required to boost economy' 

    Rohit Poddar, MD, Poddar Housing and Development, says, "This is a welcome move by the RBI as growth has totally stagnated and in fact, there is deflation in several sectors. The RBI has cut the rate on the backdrop of evolving growth-inflation dynamics with the objective to fill the output growth gaps. Raising bank’s exposure limit to single NBFC is a prudent structural development.  Bank’s lending to registered NBFCs for housing up to Rs 20 lakh per borrower is a positive news for the real estate sector. Transmission of the rate cuts to borrowers is important as wielding scissors on repo rate alone won’t be enough. Additional interventions will also be required to try and provide a boost to the economy."

  • 13:13 (IST)

    More needs to be done, says Shishir Baijal of Knight Frank India

    Shishir Baijal, CMD, Knight Frank India says, “In light of the present economic distress in the country, we welcome the move to bring down REPO rate by 35 bp. However, we would have really expected to see a more substantial cut is the need of the hour for its effective transmission to end-users. While it is the fourth consecutive rate cut this year and is in line with RBI’s recent shift to an accommodative monetary policy stance, it may not be sufficient to give the required impetus to the stalling consumption numbers. Of the 75 bps rate cuts thus far, only up to 35 bps have been seemingly transmitted to end-users and with this backdrop, another similar rate revision is not expected to trickle down much.”

  • 13:10 (IST)

    'MPC seems to have tried to tread a middle path'

    Dheeraj Singh, head of investments, Taurus Asset Management Co, says, "RBI’s monetary policy committee seems to have tried to tread a middle path by cutting rates but by an odd amount of 35 basis points instead of the usual 25 bps or 50 bps. Markets had already factored in 25 bps cut and so a 25 bps cut may not have enthused markets and therefore done little to address growth concerns. The committee, however, seemed to view a 50 basis point cut as a little excessive especially in view of the fact that rates have been reduced in the recent past, the benefits of which have yet to be passed on to customers by the banking sector”.

  • 13:03 (IST)

    Sensex, Nifty turn volatile after RBI outcome

    Domestic equity benchmarks BSE Sensex and NSE Nifty turned volatile in afternoon trade on Wednesday after the RBI slashed benchmark lending rate, but lowered the GDP growth estimates for the current financial year.

    After swinging nearly 300 points, the 30-share index was trading 20.61 points, or 0.06 percent, lower at 36,956.24 around noon. The broader Nifty also fell 3.20 points, or 0.03 percent, to 10,951.45.

  • 13:01 (IST)

    Kharif crop sowing is lower only by 6.6 percent: RBI governor

  • 12:57 (IST)

    ‘Rate cut of 35 bps won’t boost housing much’

    Anuj Puri, Chairman, ANAROCK Property Consultants, says, “The hard facts of declining consumption and a deepening economic slowdown in India are inescapable, and real estate has been severely impacted by them. To this gloomy backdrop, the RBI’s repo rate cut of 35 bps to 5.4 percent is meant to boost consumer sentiments once commercial banks transmit the benefits to actual consumers. For real estate, a rate cut of 35 bps is however insufficient to significantly improve buyer sentiment in the mid-income segment, which still has a staggering unsold inventory of 2.17 lakh units in the top seven cities. On the other hand, demand for affordable housing, which accounted for 2.40 lakh unsold units in these cities, may see improvement as this highly budget-sensitive segment already has the benefit of other incentives.

  • 12:56 (IST)

    'RBI has taken a middle ground'

    Dinesh Rohira, Founder and chief executive officer at 5nance.com said, “The RBI has taken a middle ground where markets were expecting a 25bps to 50bps rate cut. The 10-year GSEC yields have immediately remained stable, steepening the yield curve. The GDP growth target has been reduced to 6.9 percent from 7 percent, hence growth is now the highest priority as per commentary. Inflation is targeted at 4 percent, the numbers are well below the target. NBFCs have been given a liquidity boost, banks can now take exposure of 20 percent of their tier-I capital in one NBFC from 15 percent. NBFCs can now on-lend to the priority sector through banks. This will bring liquidity stimulus to the NBFC/HFC space.”

  • 12:54 (IST)

    'Growth likely to be revised down further from 6.9%'

    Shubhada Rao, chief economist, Yes Bank, Mumbai, says, "I welcome the 35 bp rate cut. Growth is likely to be revised down further from 6.9 percent. Given the well-anchored inflation, we believe that the RBI is set to cut rates in the next policy review in October. It could be 15/20 bps also. It is clear that reviving growth has received the most attention.”

  • 12:53 (IST)

    'RBI has signalled growth concerns'

    Rupa Rege Nitsure, chief economist, L&T Financial Holdings, Mumbai, says, "RBI has done the maximum that a central bank can do in the current phase of economic slowdown. By significantly revising downwards the GDP growth for H1, FY20, it has signalled the concerns on the growth front. However, the weight of structural factors has increased in India’s ongoing slowdown and it is now absolutely essential for the central and state governments to work in partnership to resolve some of the sticky sector-specific issues and concerns."

  • 12:49 (IST)

    RBI monetary policy highlights
    Following are the highlights of RBI's third monetary policy review for the current fiscal unveiled on Wednesday:
    * RBI cuts key interest rate (repo) by an unusual 35 basis points (0.35 percentage points) to 5.40 percent.
    * Reverse repo rate has been revised to 5.15 percent
    * The marginal standing facility (MSF) rate and bank rate stands at 5.65 percent
    * Maintains the accommodative policy stance
    * Cuts GDP forecast to 6.9 percent for the current fiscal from 7 percent in June policy
    * Keeps retail inflation forecast within target of 3.5-3.7 percent for the second half of 2019-20
    * Four members voted for the cut of 35 basis points in rate; two members voted for 25 basis points rate cut
    * Boosting aggregate demand, private investment assume the highest priority
    * Next monetary policy statement on 4 October.

  • 12:48 (IST)

    'RBI has pumped lot of liquidity into the banking system'

    Ashok Mohanani, Chairman, EKTA World, says, “For the fourth time in a row, the RBI cuts the repo rate, this time by 35 basis points. The RBI has pumped lot of liquidity into the banking system which should make a clear pledge to keep the banking system glow with liquidity. While the cost of capital is headed lower, we trust future commencement will be in baby steps, motivated by lowering of inflation expectations, a global recession notwithstanding. It will definitely spur growth for the real estate sector specifically. There have been many meaningful interventions by the government and regulator which has provided a positive boost to the home buying sentiment among the potential homebuyers. Rate cuts will guarantee affordability in terms of home loans and thus lowered EMI, lower GST, tax discount for the middle class as per as interim budget. Furthermore, we are also hopeful that the financial institutions will reduce the interest rates on construction finance. All this will give some sales momentum to real estate.”

  • 12:43 (IST)

    Confident of credit demand picking up: RBI

    RBI is confident of credit demand picking up and growth reviving, says governor Das.

  • 12:41 (IST)

    Third bi-monthly MPC press conference 2019-20

  • 12:40 (IST)

    'Repo rate supports sluggish economic growth'

    K Joseph Thomas, Head Research-Emkay Wealth Management, says, "The RBI policy, especially the repo rate cut of 35 bps, takes cognizance of the need to bring down interest cost on liquidity and credit, to support the sluggish economic growth and to stimulate aggregate demand. The success of this accommodative policy would depend entirely on the next level of its application, that is, the transmission of the lower rates to the ultimate borrowers. The banks seem to be seized of this need and effective cascading of the benefits of lower base rate may happen over the next few months.”

  • 12:38 (IST)

    RBI wants banks to lower rates more: Shaktikanta Das

    RBI governor Shaktikanta Das says financial markets have fully absorbed the past three rate cuts by the central bank. He said that the RBI wants banks to lower rates more going forward.

  • 12:36 (IST)

    Rupee sees high volatility post-RBI policy decision

    The rupee witnessed high volatility and slipped towards 71 level after the Reserve Bank of India on Wednesday cut key interest rate by 35 basis points to boost the slowing economy.

    The rupee had opened on a weak note at 70.92 at the interbank forex market, then fell further to 70.99 against the dollar. The domestic currency was trading at 70.91 at 1215 hrs, down 10 paise over its last close. Following the RBI's Monetary Policy Committee (MPC) decision, the local currency witnessed heavy volatility. It fell to a low of 70.99 and a high of 70.88 within minutes of RBI policy decision.

  • 12:32 (IST)

    'Not the right time to look at real interest rates'

    "This is not the right time to look at real interest rates. Our focus is to meet the output gaps," says the RBI governor 

  • 12:30 (IST)

    Ongoing slowdown cyclical: RBI governor 

    RBI governor Shaktikanta Das says that on dollar bonds, the central bank has conveyed its view to the government. The RBI says that ongoing slowdown cyclical and not structural.

  • 12:25 (IST)

    'RBI stance is pro-growth'

    Mohit Rahlan, Managing Partner & CIO – TIW Private Equity said, "The RBI policy stance clearly is pro-growth. The measures taken to increase flows to the NBFC is credit positive and will enhance lending. The policy stance has been retained as accommodative and the benign inflation outlook means one can expect more cuts in future."

  • 12:23 (IST)

    Rate cut is great news, says Parth Mehta of Paradigm Realty

    Parth Mehta, Managing Director, Paradigm Realty says, “The 35 bps rate cut is a great news tad more than our expectation of 25 bps. This shall help faster transmission of rate cuts as already banks are standing with excess liquidity and now will be compelled to deploy in good assets for which rate cuts benefits need to be passed on in the form of cheaper consumption finance loans linked to auto, home loans, personal loans etc. The credit growth is very important for inducing investment cycles to return back."

    He said that with surplus liquidity in hand and repo rate standing almost 110 bps lower at 5.4 percent from the beginning of 2019, the transmission of aggressive rate cuts by banks should follow and spur credit growth propelling consumer spending hence bringing back healthier economic growth

  • 12:20 (IST)

    A 50 basis points rate cut would have been excessive, says RBI governor

  • 12:19 (IST)

    'Rate cut is higher than consensus, expectations'

    Sujan Hajra, chief economist, Anand Rathi Securities, Mumbai says, “The 35 bp rate cut is higher than the consensus and our expectation of a 25 bp rate cut. This clearly shows the RBI’s concern about growth performance and outlook, and the urgency to take measures to revive growth.”

  • 12:18 (IST)

    GDP projection adjuisted

    GDP projection adjusted to 6.9 percent for this year from the earlier projection of 7 percent.

  • 12:17 (IST)

    Gold prices up

  • 12:16 (IST)

    Markets react: Sensex, Nifty down

  • 12:10 (IST)

    Central banks across world are lowering interest rates: RBI chief

    There is a rising downside risk to global growth. Central banks across the world are lowering interest rates. Inflation remains benign across the coutnries, says Shaktikanta Das

  • 12:01 (IST)

    MPC voted unanimously to cut rate: Shaktikanta Das

    Shaktikanta Das said that the MPC met on 3 days and deliberated on the macroeconomic outlook against the backdrop of recent events The MPC voted unanimously.

  • 11:58 (IST)

    'We are not surprised by 35 bps point'

    Kaushik Basu says, "We are not surprised by 35 bps point. We expect another 25 percent by end of the year as global economy is very bad. If NBFC settles down, RBI will not have to do much. However, if they worsen, then we dont rule out more rate cuts in 2020. 

  • 11:56 (IST)

    Four members vote to reduce policy repo rate by 35 bps

    Four members namely Ravindra H Dholakia, Michael Debabrata Patra, Bibhu Prasad Kanungo and Shaktikanta Das voted to reduce the policy repo rate by 35 basis points, while two members —Chetan Ghate and Pami Dua—voted to reduce the policy repo rate by 25.
    basis points.

  • 11:53 (IST)

    'Welcome the window prepared for NBFCs'

    Taimur Baig, MD and chief economist, DBS GRP Research says "I see one more cuts. The RBI was caught in between and seen as cavalier and did not want to go 50 bps. I do welcome the window prepared for NBFCs."

  • 11:50 (IST)

    RBI to maintain accommodative stance of monetary policy

    On the basis of an assessment of the current and evolving macroeconomic situation, RBI's Monetary Policy Committee (MPC) at its meeting on Wednesday decided to: reduce the policy repo rate under the liquidity adjustment facility (LAF) by 35 basis points (bps) from 5.75 per cent to 5.40 per cent with immediate effect. Consequently, the reverse repo rate under the LAF stands revised to 5.15 percent, and the marginal standing facility (MSF) rate and the Bank Rate to 5.65 percent.

    The MPC also decided to maintain the accommodative stance of monetary policy. 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 percent, while supporting growth.    

    All members of the MPC unanimously voted to reduce the policy repo rate and to maintain the accommodative stance of monetary policy. 

  • 11:47 (IST)

    RBI cuts rate by 35 bps to 5.40 percent

  • 11:43 (IST)

    'Fiscal situation is not a big concern at the moment'

    Kaushik Das of Deutsche Bank said that the fiscal situation is not a big concern at the moment. "The 7 percent forecast will be the focus. Inflation is more or less in line and there is no need to change the inflation forecast," he said.

    Rate cut would lead to more transmission, Das said adding global economy is not looking good and the RBI will refer to that.

  • 11:37 (IST)

    Rupee slips 12 paise to 70.93 against dollar in early trade 

    The rupee opened on a weak note and fell 12 paise to 70.93 against the US dollar in early trade on Wednesday ahead of the outcome of Reserve Bank of India's monetary policy review meet. Forex traders besides RBI's monetary policy review outcome, unabated foreign fund outflows and cautious opening in domestic equity market also weighed on the local unit.

    At the Interbank Foreign Exchange, the rupee opened weak at 70.92 then fell to 70.93 against the US dollar, showing a decline of 12 paise over its previous closing. The Indian rupee on Tuesday had closed at 70.81 against the US dollar.

  • 11:06 (IST)

    Hopeful of yet another rate cut by MPC: SBI chairman Rajnish Kumar
    "I hope so, everybody is expecting a rate cut...everybody says 25 bps (would be the reduction)," Kumar said when asked about his expectations from MPC.
    The industry also expects the six-member MPC to take steps to improve liquidity situation and also ensure the transmission of rate cuts to borrowers by the banks. Industry body Confederation of Indian Industry (CII) in a statement said the central bank started its interest rate easing cycle in February 2019, taking cognizance of the headwinds to growth and inflation reading remaining below the RBI's target of 4 percent.

  • 10:47 (IST)

    Sensex, Nifty start on a cautious note ahead of RBI policy outcome

    Domestic equity benchmarks BSE Sensex and NSE Nifty started on a cautious note on Wednesday ahead of the outcome of Reserve Bank of India's policy outcome. The 30-share index was trading 18.58 points or 0.05 percent up at 36,995.43; while the broader Nifty slipped 8.55 points or 0.07 percent to 10,943.05 in morning trade. 

    In the previous session on Tuesday, the 30-share index closed at 36,976.85, up by 277.01 points, or 0.75 percent, and the Nifty ended 85.65 points, or 0.79 percent, higher at 10,948.25 points.

RBI Monetary Policy August 2019; LATEST updates: The Reserve Bank on Wednesday cut key interest rate for the fourth consecutive time, as it reduces repo rate by 35 basis points to 5.40 percent to boost the slowing economy.

Almost 80 percent of 66 economists surveyed by Reuters expected the RBI to cut its benchmark repo rate by 25 bps. Three respondents predicted a 50 bps cut and the remaining 10 forecast the rate would be left unchanged.

Reducing interest rates would please Finance Minister Nirmala Sitharaman, who delivered her first budget last month after being promoted by Prime Minister Narendra Modi following his re-election in May.

 RBI Monetary Policy August 2019: Governor Shaktikanta Das says will ensure there is sufficient liquidity available for economy

File image of RBI. AFP

“I’ll honestly wish (for a) rate cut ... a significant rate cut would do a lot of good for the country,” Sitharaman told The Economic Times newspaper in an interview published on Monday.

Her Budget had included measures aimed at improving the investment climate but lacked any direct steps to stimulate an economy that grew just 5.8 percent year-on-year in the January-March quarter, its slowest pace in five years, and well below the double-digit growth levels that Modi wants.

Aside from defending against inflation and protecting the Indian rupee’s health, the RBI has oversight of the state-owned banks and a mandate to protect financial stability, which could be undermined if economic growth stays low given the stress prevailing among banks and shadow lenders.

The last time the RBI made so many back-to-back cuts was after the global financial crisis over a decade ago, when most major central banks were desperate to revive economic growth.

“If the inflation estimate is lower than target and RBI has space they should cut. I expect a 25 bps cut and a dovish tone,” said A. Prasanna, chief economist at ICICI Securities Primary Dealership.

Running at 3.18 percent in June, India’s retail inflation has remained below the central bank’s medium-term target of 4 percent for almost a year and is not expected to rise significantly above that until at least 2021, according to a separate Reuters poll.

But, currency and bond dealers noted that external influences could limit India’s room for future rate reductions, as the head of the US Federal Reserve warned against expecting a lengthy easing cycle after cutting US interest rates for the first time in over a decade on Wednesday.

But, rate cuts alone cannot help India’s economy unless the benefits are passed on to consumers and corporate borrowers. And saddled with bad debt, and scared of losing depositors, banks have been slow to reduce lending and deposit rates despite the RBI’s prodding.

State Bank of India cut interest rates on deposits across all maturities on Monday, but analysts said it would take time for the country’s largest bank to make matching cuts in its lending rates.

“It will be important to study the policy narrative to get a direction of likely future action by the RBI, liquidity measures, any other structural changes etc.,” said Shanti Ekambaram, president, consumer banking at Kotak Mahindra Bank.

“Suffice it to say that inflation will be the central theme balanced with the need to boost growth”.

At least the monsoon rains, after a poor start, appear to becoming kinder, which is good news for around two-thirds of Indians who depend on the farm sector for their livelihoods.

Updated Date: Aug 07, 2019 13:17:08 IST