live

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

RBI Monetary Policy August 2019; LIVE updates: There is no cartelisation by banks in holding onto higher lending rates, says Shaktikanta Das

FP Staff August 07, 2019 12:36:18 IST
Auto refresh feeds
RBI Monetary Policy August 2019: Governor Shaktikanta Das says will ensure there is sufficient liquidity available for economy
  • Almost 80% of 66 economists surveyed by Reuters expected the RBI to cut its benchmark repo rate by 25 bps

  • The last time the RBI made so many back-to-back cuts was after the global financial crisis over a decade ago

  • Running at 3.18% in June, India’s retail inflation has remained below RBI's medium-term target of 4% for almost a year

Highlights

LIVE NEWS and UPDATES

Aug 07, 2019 - 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."

Aug 07, 2019 - 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.”

Aug 07, 2019 - 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”.

Aug 07, 2019 - 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.

Aug 07, 2019 - 13:01 (IST)

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

Aug 07, 2019 - 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.

Aug 07, 2019 - 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.”

Aug 07, 2019 - 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.”

Aug 07, 2019 - 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."

Aug 07, 2019 - 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.

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:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Union Budget 2021: US business advocacy group urges Nirmala Sitharaman to lower tariff to compete with RCEP
World

Union Budget 2021: US business advocacy group urges Nirmala Sitharaman to lower tariff to compete with RCEP

India had walked out of the RCEP, a 14-member group led by China, as negotiations failed to address New Delhi's outstanding issues and concerns

RBI Grade B Officer Recruitment 2021: Notification on application process out soon at rbi.org.in
India

RBI Grade B Officer Recruitment 2021: Notification on application process out soon at rbi.org.in

The written exams will be conducted in two phases following which an interview will be held to shortlist the applicants

Union Budget 2021: Increase spending to boost healthcare infrastructure, service providers tell Centre
India

Union Budget 2021: Increase spending to boost healthcare infrastructure, service providers tell Centre

The COVID-19 pandemic exposed the chinks in the healthcare system and highlighted the need for a major infrastructure revamp, Manipal Hospitals MD and CEO Dilip Jose said