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RBI Monetary Policy Updates: Efforts on to ensure another large NBFC does not default, says governor Shaktikanta Das

RBI MPC LATEST Updates: RBI governor Shaktikanta Das has said that efforts are on to ensure that another large non-banking finance company (NBFC) does not default.

FP Staff October 04, 2019 13:04:03 IST
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RBI Monetary Policy Updates: Efforts on to ensure another large NBFC does not default, says governor Shaktikanta Das

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LIVE NEWS and UPDATES

Oct 04, 2019 - 12:02 (IST)

Follow Fourth Bi-Monthly Monetary Policy Press Conference by RBI governor Shaktikanta Das here: 

Oct 04, 2019 - 15:32 (IST)

RBI rate cut a good move: Motilal Oswal

The RBI's repo rates by 25 bps to 5.15 percent is a very good level of indicative rates, said Motilal Oswal, Managing Director, Motilal Oswal Financial Services.

"The issue is the transmission of these rates in the system. RBI has been asking the banking system to offer loans at a level that reflects the benchmark cut, but the system is reluctant to pass on, due to risk aversion. Equity markets are cautious and watchful about the earnings season which at this juncture looks less enthusiastic,” said Oswal.

Oct 04, 2019 - 15:12 (IST)

'Rate cut will infuse much-needed liquidity in system'
 

Given the current economic scenario, 25 bps cut is in line with India Inc expectations, Umesh Revankar, MD and CEO - Shriram Transport Finance.

"This rate cut would infuse the much-needed liquidity into the system which will support investments and improve the overall financial health of the economy,” h said.

Oct 04, 2019 - 15:10 (IST)

'There is room for further cuts'


"In line with our expectation, the MPC has cut rates by 25 bps. It retained the stance at ‘accommodative’ indicating there is room for further rate cuts. We are expecting one more rate cut, albeit of smaller magnitude (15 bps) later in the fiscal year," said Anagha Deodhar, ICICI Securities.

Oct 04, 2019 - 14:33 (IST)

'RBI rate cut in sync with market sentiment' 

The 25 bps rate cut is definitely a welcome move showing the alignment of monetary and fiscal policy initiatives in the backdrop of a downward revision in the GDP growth to 6.1 percent for FY20, said Ramesh Nair, CEO, India JLL.

"The rate cut of 25 bps delivered by the RBI in its fourth bi-monthly monetary policy meeting is in line with the market expectations. This move is in sync with the government’s efforts to accelerate economic activity," he said.

Oct 04, 2019 - 14:25 (IST)

'Rate cut will give major boost to retail sector'
 

The RBI's move will be welcomed by the consumers, especially during the festive season. This could give a major boost to the retail sector, said Anuj Kacker, co-founder and COO, MoneyTap.

Oct 04, 2019 - 14:22 (IST)

Expect more rate cuts from RBI
 

A rate cut by another 35 to 60 bps is expected by the end of the current easing cycle given the stable inflation and soft global growth, said Jyoti Roy, DVP Equity Strategist, Angel Broking.

"However we believe that more than rate cuts transmission of rate cuts is more important now given that spread between the repo rate and the 10 year G sec at over 150 bps is too high, especially considering the accommodative stance of the RBI and surplus liquidity in the system," he said.

Oct 04, 2019 - 14:20 (IST)

Sensex down more than 250 points

Oct 04, 2019 - 14:20 (IST)

'Repo rate cut good for growth'
 

The sustained accommodative stance of the RBI is good for growth, especially for the residential real estate sector, said Kamal Khetan, chairman and managing director, Sunteck Realty.

"Clearly, benign inflation has given greater scope for the bank to go for a revival of the economy. We hope that banks will now accelerate the transmission of the RBI rate cuts to the common man to improve the demand and consumption across all sectors," he said.

Oct 04, 2019 - 14:18 (IST)

'Positive step to allay fears'
 

The fifth straight cut since February 2019 is a positive step to allay fears of a slow down, feed real economy and boost domestic demand, specifically household consumptions, said Mahendra Agrawal, director IndiaMoneyMart.

"The interest rate is falling, investors are likely to give the first prerogative to returns instead of risk. This will further boost the flight of capital in hybrid fixed income asset classes such as P2P lending or long term debt mutual funds," he said.

RBI MPC LATEST Updates: RBI governor Shaktikanta Das has said that efforts are on to ensure that another large non-banking finance company (NBFC) does not default.

"We continue to monitor the PMC Bank situation, keeping in mind the interest of the depositors," he said.

Das said that as soon as the PMC Bank issue came to RBI notice, the banking regulator acted swiftly. He added, one incident should not be used to generalise the cooperative banking system, says Shaktikanta Das.

The RBI governor said that the Indian banking sector remains sound and stable.

Das said that he is not aware of any demand by the government for an interim dividend of Rs 30,000 crore from RBI.

Shaktikanta Das has said that the overall liquidity remained surplus in August and September 2019 despite the expansion of currency in circulation and forex operations by RBI draining liquidity from the system.

Global economy has lost further momentum, says RBI governor.

RBI Monetary Policy Updates Efforts on to ensure another large NBFC does not default says governor Shaktikanta Das

File image of RBI governor Shaktikanta Das. News18

RBI said that its September 2019 round of inflation expectations survey indicates that households expect inflation to rise by 40 basis points over a 3-month ahead horizon and 20 basis points over a one-year ahead horizon.

RBI governor Shaktikanta Das has already hinted that benign inflation provides room for further monetary policy easing while space for fiscal space is limited.

The RBI is predicted to lower its key lending rate or the repo rate by 25 basis points (bps) to 5.15 percent, which would take cumulative cuts so far this year to 135 bps.

Most analysts forecast one more cut of 15 bps in December this year.

The government has announced a series of measures including steepest cut in corporate tax, rollback of enhanced surcharge on Foreign Portfolio Investors, among others to jump-start growth which hit a six-year low of 5 percent during the first quarter of the current fiscal.

The six-member MPC is scheduled to announce the fourth bi-monthly monetary policy for 2019-20 on Friday, after a three-day meeting.

There was no meeting of the panel on 2 October on account of Gandhi Jayanti.

The central bank has already slashed repo rate four times consecutively this year amounting to 110 basis points in aggregate.

At its last meeting in August, the Monetary Policy Committee (MPC) reduced the benchmark lending rate by an unusual 35 basis points to 5.40 percent.

The upcoming MPC meeting comes in the backdrop of RBI's mandate to banks to link their loan products to an external benchmark, like repo rate, for faster transmission of reduction in policy rates to borrowers, from 1 October.

Ahead of the meeting, the Das-headed Financial Stability and Development Council (FSDC) sub-committee took stock of the prevailing macroeconomic situation.

Earlier, the RBI governor had said that the government has little fiscal space, giving hope that the central bank may provide more monetary stimulus to prop up the economy.

The government's fiscal space has been squeezed on account of cut in rates of corporate tax as well as lowering of GST rate on various goods. Revenue collection too has been below the Budget estimates.

Experts are of the opinion that another rate cut is on the cards as the government's hands are tied and the onus of taking initiatives now rests with the central bank.

Shanti Ekambaram, president, Consumer Banking, Kotak Mahindra Bank, said with inflation still within the RBI's medium-term target of 4 percent, the MPC has the headroom to cut the repo rate further.

"However, the recent volatility in crude oil prices and the fiscal measures announced by the government will have an impact on inflation in the medium term and the fiscal deficit. Hence, we expect the MPC to be more measured in its response with a rate cut of 20-25 basis points in the October policy," she said.

"We continue to expect the RBI MPC to follow RBI Governor into another 'out-of-the-box' 35 basis points repo rate cut on 4 October. This should send a strong signal for bank lending rate cuts with the 'busy' industrial season round the corner," BofA Merrill Lynch said in a report.

According to NAREDCO president Niranjan Hiranandani, there is an expectation of a further 50 basis points repo rate cut in the backdrop of muted inflation which stands lower than the expected 3.2 percent.

The further reduction of repo rate will not only bring down the lending rates but also incentivise investment and boost consumption, he said.

While economic activities are showing signs of sluggishness, the policymakers are drawing solace from the fact that retail inflation remains in the comfort zone of the central bank.

Retail inflation inched up to 3.21 percent in August but remained within the RBI's comfort zone.

The RBI has been mandated by the government to ensure that inflation remains below 4 percent, with deviation of 2 percent on either side.

Experts and industry feel low inflation provides enough headroom for the RBI to further lower the policy rate, especially when festive season has just started. People make huge purchases during Navratras and Diwali.

With liquidity concerns in the NBFC sector almost taken care of, the real estate sector too is hopeful that the RBI will go in for the much-needed rate cut to boost demand for affordable housing.

With inputs from agencies

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