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Mumbai: The Reserve Bank is unlikely to cut the benchmark <keyword id="20071327" type="General" weightage="20" keywordseo="interest-rate" source="keywords">interest rate</keyword> in its forthcoming bi-monthly monetary policy review later in the week as <keyword id="19999652" type="General" weightage="20" keywordseo="retail-inflation" source="keywords">retail inflation</keyword> is still a cause of concern, and there is a possibility of the Middle East crisis deteriorating further, impacting crude oil and commodity prices, say experts. Earlier this month, the government reconstituted the Reserve Bank's rate-setting panel -- <keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (MPC). The reconstituted panel, with three newly appointed external members, will commence its maiden meeting on Monday. MPC Chairman RBI Governor Shaktikanta Das will reveal the outcome of the three-day discussion on Wednesday (October 9). The <keyword id="19899810" type="General" weightage="100" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (RBI) has kept the repo or short-term lending rate unchanged at 6.5 per cent since February 2023, and experts think some easing could only be possible in December. The government has tasked the central bank to ensure that Consumer Price Index (CPI) based retail inflation remains at 4 per cent with a margin of 2 per cent on either side. In the current context, experts feel that the RBI may not follow the US Federal Reserve, which lowered the benchmark rates by 50 basis points, and the central banks of some developed nations, which have reduced the interest rates. "We do not expect any change in the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> or stance by MPC. The reason is that inflation for September and October will be above 5 per cent, and the present low inflation is due to the base effect. Besides, core inflation is inching upwards," said Madan Sabnavis, Chief Economist, Bank of Baroda. Further, the recent Iran-Israel imbroglio can intensify, and there is uncertainty here, he said. "Hence, the status quo is the most likely option even for new members. Inflation forecast may be lowered by 10-20 bps and no change in GDP forecast likely," said Sabnavis. The central bank last hiked the repo rate to 6.5 per cent in February 2023 and since then, it has held the rate at the same level. Icra Chief Economist Aditi Nayar said that given the undershooting in the initial first quarter GDP growth relative to the MPC's forecast and the likely sizeable undershooting in the second quarter CPI inflation print as well, "we believe a stance change to neutral may be appropriate in the October 2024 policy review". This could be followed by a shallow rate-cutting cycle of 25 bps each in December 2024 and February 2025, she added. "The abundant monsoon offers some insurance for crop inflation. The impact of global political developments and geopolitical uncertainty on the growth inflation dynamics remains a risk," Nayar added. An HSBC report said three developments stand out -- softer growth numbers have trickled in recently, inflation has been falling, and the external environment has moved from rate hikes to cuts. "We believe the RBI doesn't gain from waiting any longer. We think it will change its stance from a hawkish 'withdrawal of accommodation' to 'neutral' in the upcoming 9 October policy meeting, followed by repo rate cuts of 25 bps each in the December and February meetings, taking the repo rate to 6 per cent," the report said. The RBI kept the repo rate unchanged at 6.5 per cent in its August bi-monthly review amid risks from higher food inflation. This was the ninth consecutive MPC meeting, which decided to maintain the status quo on the rate front. Pradeep Aggarwal, founder and chairman, Signature Global (India) Limited, said while the real estate industry, developer community, and homebuyers are hoping for an interest rate cut in the upcoming monetary policy review, the RBI is likely to hold on to the interest rate cuts for the tenth consecutive time. "The apex bank still seems uncomfortable with the overall retail inflation scenario, particularly food inflation. As such, it is expected to maintain the status quo. The recent interest rate cut by the US Federal Reserve has ignited similar hopes even in India, but the domestic scenario is very different," he added. SBM Bank India Head Treasury Mandar Pitale believed that the MPC has persistently advocated a restrictive policy until inflation aligns durably towards the 4 per cent target. "With the unfavourable base effect taking the next couple of CPI prints near 5 per cent plus or minus, it will pose a major challenge for MPC to start easing from the October meeting," Pitale said, adding that the MPC is also expected to deliberate upon the global factors like growth-inflation behaviour in developed economies. The government has appointed Ram Singh, Saugata Bhattacharya, and Nagesh Kumar as external members of the MPC. They have replaced Ashima Goyal, Shashanka Bhide, and Jayanth R Varma. Apart from the Governor, the other internal members are the RBI Deputy Governor in charge of monetary policy Michael Debabrata Patra and the Executive Director monetary policy department of RBI Rajiv Ranjan. In an off-cycle meeting in May 2022, the MPC raised the policy rate by 40 basis points and it was followed by rate hikes of varying sizes, in the subsequent meetings till February 2023. The repo rate was raised by 250 basis points cumulatively between May 2022 and February 2023.

Status-quo on interest rate likely, say experts ahead of RBI's policy review

Mumbai, The <keyword id="19949639" type="General" weightage="20" keywordseo="rupee" source="keywords">rupee</keyword> appreciated 9 paise to close at 83.30 (provisional) against the US <keyword id="19904292" type="General" weightage="20" keywordseo="dollar" source="keywords">dollar</keyword> as the Reserve Bank of India on Friday kept the benchmark interest rate unchanged at 6.5 per cent for the seventh time in a row. However, a strong US dollar against major rivals overseas and elevated crude oil prices capped sharp gains for the local unit, forex traders said. At the interbank foreign exchange market, the local unit opened at 83.44 against the greenback. The unit hit an intra-day high of 83.26 and a low of 83.45. The local unit finally settled at 83.30 (provisional) against the dollar, 9 paise higher from its previous close. On Thursday, the rupee recovered 14 paise to close at 83.39 against the US dollar. The rupee gained as the <keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword>'s monetary policy remained the focus. The central bank kept CPI and GDP projections for FY25 unchanged at 4.5 per cent and 7 per cent, respectively, said Anuj Choudhary Research Analyst, Sharekhan by BNP Paribas. "After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, it (MPC) decided by a 5 to 1 majority to keep the policy repo rate unchanged at 6.50 per cent," RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword> said. He further said that the six-member MPC would remain focused on the withdrawal of accommodation to ensure that <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword> progressively aligns with the target while supporting growth. While unveiling the first bi-monthly monetary policy for the current financial year, the RBI has retained its growth and inflation forecast for the current fiscal at 7 per cent and 4.5 per cent, respectively. "We expect the rupee to trade with a slight negative bias on risk aversion in global markets and a strong US dollar. The surge in crude oil prices and FII outflows may also weigh on the rupee. "Renewed geopolitical tensions in the Middle East may put downside pressure on risk assets. However, an optimistic economic outlook by the RBI Governor and any intervention by the central bank may support the rupee at lower levels," Choudhary added. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.12 per cent higher at 104.24. Brent crude futures, the global oil benchmark, rose 0.09 per cent to USD 90.73 per barrel. On the domestic equity market front, Sensex advanced 20.59 points, or 0.03 per cent, to close at 74,248.22. The Nifty rose 0.95 points to settle at 22,513.70. Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday as they offloaded shares worth Rs 1,136.47 crore, according to exchange data.

Rupee rises 9 paise to close at 83.30/USD post-RBI policy decision

Amid questions on the depleting <keyword id="20776807" type="General" weightage="100" keywordseo="loan-to-deposit-ratio" source="keywords">loan-to-deposit ratio</keyword> in <keyword id="19895091" type="General" weightage="20" keywordseo="Indian-banks" source="keywords">Indian banks</keyword>, a recent report by <keyword id="19896146" type="General" weightage="20" keywordseo="Motilal-Oswal" source="keywords" meta.keywordsubtype="org" meta.entityname="Motilal Oswal" meta.hostid="269" meta.entityid="Motilal Oswal">Motilal Oswal</keyword> suggests that the loan-to-deposit (LD) ratio is likely to subside on its own in the coming months. The debate on loan-to-deposit ratio (LD), particularly concerning sluggish <keyword id="19998084" type="General" weightage="20" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> and potential risks to <keyword id="20089808" type="General" weightage="20" keywordseo="financial-stability" source="keywords">financial stability</keyword> is raised by even the finance minister and the <keyword id="20151998" type="General" weightage="20" keywordseo="RBI-governor" source="keywords">RBI governor</keyword>. However, the report notes that on closer examination, the situation may not be as alarming as it seems. As of 9th August, 2024 the Indian <keyword id="19964544" type="General" weightage="20" keywordseo="banking-sector" source="keywords">banking sector</keyword>'s loan-to-deposit (LD) ratio stood at 77.2 %, which is slightly below its recent peak of 78.2 % on 22nd March 2024, and its all-time high of 78.8 % in September 2013. The report stated that typically a rising LD ratio is indicative of a tightness in the banking sector, potentially indicating overheating. A lower LD indicates that the bank is aggressive in its credit disbursement practises, which could be risky. It highlighted that an analysis of the sector's transactions with the Reserve Bank of India (RBI) through the liquidity adjustment facility (LAF), along with recent trends in the weighted average call rate (WACR), suggests that the current rise in the LD ratio does not indicate tightness, which is why there is no immediate cause of concern. In fact, the report added that the concern over weak deposit growth may be overstated. Historical data show that bank deposits grew at an average rate of 9.5 % during the pre-COVID period (January 2015 to February 2020) and 10.4 % in the post-COVID period (March 2020 to August 2024). Earlier, Finance Minister Nirmala Sitharaman also urged state-run banks to enhance deposit mobilization through attractive offers and focusing on Tier-2 and Tier-3 cities. Loan-to-deposit ratio pegs the total deposits received by the bank against the loans it has offered. It helps in understanding how liquid the bank is. The loan-to-deposit ratio (LDR) is a financial metric that compares a bank's total loans to its total deposits. It's used to assess a bank's liquidity and credit risk, and to inform lending and deposit-taking decisions The report said while the exact measures are unclear, the deposit growth could potentially be increased by making other asset classes less attractive through taxation or interest rates, or by boosting fiscal spending to increase net credit to the government. In its forecast, the report noted that private banks will witness a moderation in their <keyword id="19998083" type="General" weightage="20" keywordseo="credit-growth" source="keywords">credit growth</keyword>, while public sector banks will maintain a healthy credit growth rate. "Our analysis suggests that deposit growth could be raised by either making other asset classes unattractive (through taxation and/or interest rate) or increasing the growth in net credit to the government by pushing fiscal spending higher" the report added. Alternatively, policymakers might consider curtailing loan growth to lower the LD ratio. However, this could slow deposit growth, particularly if corporate credit growth remains weak. Encouraging savers to shift investments from other assets to bank deposits could also be an option, but this carries risks of overreach and potential damage to economic confidence. Das had also flagged the excessive growth, or froth developing in the personal loan space. Notably, while credit growth in unsecured personal loans like credit cards continues to decline, it remains elevated at 23.3% as of June 2024. However, this is a significant reduction from 34.2% witnessed in November 2023. As fiscal spending increases, bank credit to the government is likely to grow, which should elevate deposits and broad money supply. The report said "However, the extent of foreign capital inflows and the RBI's policy for managing these inflows remain uncertain". Last month, RBI governor Shaktikanta Das had also addressed this issue in the 50th meeting of MPC (Monetary Policy Committee). Per him, deposit mobilisation has been lagging credit growth for some time now. This may potentially expose the system to structural liquidity issues. "While there could be a debate regarding ‘deposits funding loans’ vis-à-vis ‘loans funding deposits’, the current regulatory concern stems from the fact that there could be structural changes happening which banks need to recognise and, accordingly, devise their strategies. Households and consumers who traditionally leaned on banks for parking or investing their savings are increasingly turning to capital markets and other financial intermediaries", Das said. Per him, while bank deposits continue to remain dominant as a percentage of financial assets owned by households, their share has been declining consistently, since households are now increasingly allocating their savings to mutual funds, insurance funds, pension funds and other avenues.

Loan-to-deposit ratio will subside on its own in coming months, notes Motilal Oswal report

Mumbai, Equity benchmark index <keyword id="19896382" type="General" weightage="20" keywordseo="Sensex" source="keywords" topicspecial.url="https://economictimes.indiatimes.com/indices/sensex_30_companies">Sensex</keyword> registered marginal gains to hit fresh lifetime high on Friday after the Reserve Bank maintained the status quo on key <keyword id="19950650" type="General" weightage="20" keywordseo="interest-rates" source="keywords">interest rates</keyword> amid a negative trend in global markets. The six-member rate-setting panel of the Reserve Bank of India (RBI) on Friday kept the benchmark interest rates unchanged at 6.5 per cent for the seventh time in a row. It also expressed concerns over food inflation given IMD's prediction of above-normal maximum temperatures during April-June. The 30-share BSE Sensex inched up 20.59 points or 0.03 per cent to settle at a fresh record of 74,248.22. The index oscillated between the intra-day peak of 74,361.11 and the low of 73,946.92. The broader NSE <keyword id="19896381" type="General" weightage="20" keywordseo="Nifty" source="keywords" topicspecial.url="https://economictimes.indiatimes.com/indices/nifty_50_companies">Nifty</keyword> ended with a marginal loss of 0.95 points at 22,513.70. As many as 28 components of the 50-share benchmark ended in the red. "Although the RBI policy meeting unfolded as anticipated, concerns over food inflation and warnings of a heat wave tampered sentiment," said Vinod Nair, Head of Research, Geojit Financial Services. Among the Sensex constituents, 18 stocks closed in negative with UltraTech Cement, L&amp;T, Bharti Airtel, Bajaj Finance and Tech Mahindra being major laggards. Other heavyweights like Asian Paints, Maruti, Titan and JSW Steel also saw heavy selling. In contrast, Kotak Mahindra Bank, Bajaj Finserve, HDFC Bank, ITC and SBI bucked the trend and ended the session with a gain of up to 2.09 per cent. BSE largecap gained 0.15 per cent, while midcap and smallcap indices rose 0.50 per cent. Global oil benchmark Brent crude advanced 0.11 per cent to USD 90.75 a barrel. Asian markets were lower, with Japan's Nikkei 225 losing 1.96 per cent and Hang Seng of Hong Kong declining 0.01 per cent. South Koran index Kospi fell 1.01 per cent. European markets were trading in the red. Germany's DAX and London's FTSE 100 lost 1.57 per cent and 0.90 per cent, respectively, while CAC40 of France went down by 1.36 per cent. The US markets closed largely lower in the overnight trade on Thursday. "The global sentiment was dampened by the rise in oil prices and tensions in the Middle East. Investors remain attentive to upcoming US non-farm payroll and unemployment data, seeking clarity on the Federal Reserve's future rate path," Nair said. Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,136.47 crore on Thursday, according to exchange data. On Thursday, the BSE benchmark Sensex surged 350.81 points or 0.47 per cent to settle at its lifetime high of 74,227.63. The NSE Nifty also hit its fresh peak of 22,514.65, gaining 80 points or 0.36 per cent.

Sensex gains marginally to scale new peak after RBI policy decision

The surprise move to hold repo rate should not be seen as an indicator of carrying out similar moves in the future, and <keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> will "not hesitate" in taking further action on rates if needed, Governor <keyword id="6359111" type="General" weightage="80" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> said on Thursday. "If I have to characterise today's monetary policy in just one line...it's a pause, not a pivot," Das told reporters in the customary interaction with reporters after the announcement of the policy review. Earlier in the day, the six-member MPC unanimously decided to pause after repeated hikes in rate over the last 11 months, surprising analysts who were expecting the central bank to make a final 25 basis points hike before opting to pause. The benchmark policy rate (repo rate) is 6.5 per cent. Das said the job to decisively bring down inflation is "not yet finished", and RBI's policy priority continues to be price stability. RBI is keen to assess the cumulative impact of the rate actions done till now, he said. There has been a cumulative hike of 250 basis points since May 2022. In his statement while announcing the policy review, Das pledged to hike interest rate again if needed, saying the decision to pause was "for this meeting only". Speaking to reporters, Das reminded that RBI's target is to get headline inflation to 4 per cent from the 6 per cent levels at present, and the monetary policy will be working towards progressively aligning with the target. Deputy Governor Michael Patra said RBI has marginally upped its FY24 growth estimate to 6.5 per cent primarily on assumption of a decline in the average oil price to USD 85 per barrel from USD 90 per barrel earlier.

It's just a pause not a pivot, says Shaktikanta Das on RBI's status quo

The rupee declined by 76 paise to close at 82.61 against the <keyword id="6368584" type="General" weightage="20" keywordseo="us-dollar" source="Orion">US dollar</keyword> on Tuesday due to heavy selling pressure in domestic equities and rising crude prices in the overseas markets. In addition, investors remained concerned over continued foreign capital outflows ahead of the <keyword id="15713845" type="General" weightage="20" keywordseo="RBIs-policy-announcement" source="Orion">RBI's policy announcement</keyword> on Wednesday, forex dealers said. At the interbank foreign exchange market, the local unit opened weak at 81.94, then slipped further to end at 82.61, registering a fall of 76 paise. During the day, the local unit witnessed an intraday high of 81.94 and a low of 82.63. In the previous session on Monday, the rupee had settled down by 52 paise at 81.85 against the dollar. The dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.05 per cent to 105.24. Global oil benchmark Brent crude futures rose 0.64 per cent to USD 83.22 per barrel. On the domestic equity market front, the 30-share BSE Sensex fell 208.24 points or 0.33 per cent to end at 62,626.36, while the broader NSE Nifty 58.30 declined points or 0.31 per cent to 18,642.75. Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday as they sold shares worth Rs 1,139.07 crore, according to exchange data. The World Bank on Tuesday revised upwards its GDP growth forecast for India to 6.9 per cent for 2022-23, saying the economy was showing higher resilience to global shocks. In its India Development Update, the World Bank said the revision was due to the higher resilience of the Indian economy to global shocks and better-than-expected second-quarter numbers. The Reserve Bank's rate-setting panel on Monday started brainstorming for the next round of monetary policy amid expectations of a moderate interest rate hike of 25-35 basis points as inflation has started showing signs of easing and economic growth tapering. The RBI has hiked key benchmark lending rate by 50 basis points (bps) thrice since June over and above an off-cycle 40 bps increase in the repo in May. RBI Governor Shaktikanta Das would be announcing the bi-monthly monetary policy on Wednesday (December 7) at the conclusion of the three-day Monetary Policy Committee (MPC) meeting. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/rupee-has-fared-relatively-well-in-2022-versus-other-emerging-market-peers-world-bank/articleshow/96028636.cms" style="">Rupee has fared relatively well in 2022 versus other emerging market peers: World Bank</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/world-bank-revises-indias-gdp-growth-forecast-upwards-to-6-9-for-fy23/articleshow/96023459.cms">World Bank revises India's GDP growth forecast upwards to 6.9% for FY23</a>

Rupee slumps 76 paise to close at 82.61 against US dollar

<ul><li><keyword id="4667782" type="General" weightage="80" keywordseo="sabnavis" source="Orion">Sabnavis</keyword> said it believes that the terminal repo rate for the financial year is expected to be 6.5 per cent.</li><li>An out-of-turn meeting of the <keyword id="6375120" type="General" weightage="50" keywordseo="monetary-policy-committee" source="Orion">Monetary Policy Committee</keyword> (MPC) of the Reserve Bank of India was held in early November.</li><li><keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> had already hiked the key policy rate by 190 basis points since May to 5.9 per cent to cool off domestic retail inflation.</li></ul> The Reserve Bank of India's three-day monetary policy committee meeting commences today. Financial markets will be keenly watching the committee's stance as consumer inflation is still above the 6 per cent target band. "The RBI will be presenting the monetary policy against the backdrop of GDP growth slowing down as well as inflation being high above 6 per cent. We do believe that the MPC will continue with rate hikes this time though the magnitude will be lower - probably 25-35 bps," said <keyword id="170005" type="General" weightage="50" keywordseo="madan-sabnavis" source="Orion">Madan Sabnavis</keyword>, Chief Economist at <keyword id="6358007" type="General" weightage="50" keywordseo="bank-of-baroda" source="Orion">Bank of Baroda</keyword>. More specifically, Sabnavis said it believes that the terminal repo rate for the financial year is expected to be 6.5 per cent, which essentially means there will be one more rate hike in February meeting. "It is unlikely to change the stance and the withdrawal of liquidity will continue. While the RBI will take a hard look at both the GDP and inflation projections, there could be some downward revision for GDP growth. In short, there will not be any surprise for the market just as is the case for global markets too which are now expecting more moderate increases in interest rates by the <keyword id="45672" type="General" weightage="50" keywordseo="fed" source="Orion">Fed</keyword>," Sabnavis added. The central bank had already hiked the key policy rate by 190 basis points since May to 5.9 per cent to cool off domestic retail inflation that has stayed above the RBI's upper tolerance limit for over three quarters now. In October, retail inflation was 6.77 per cent. Under the flexible inflation targeting framework introduced in 2016, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 per cent range for three quarters in a row. An out-of-turn meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India was held in early November to discuss and draft the report to be sent to the central government for having failed in maintaining the inflation mandate. The meeting was called under Section 45ZN of the Reserve Bank of India (RBI) Act 1934, which pertains to steps to be taken if the central bank fails to meet its inflation-targeting mandate. Further details about the special meeting are not officially in the public domain. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/more-to-be-expected-from-rbis-mpc-meeting-than-just-a-rate-hike-say-experts/articleshow/95991628.cms">More to be expected from RBI's MPC meeting than just a rate hike say experts</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/health/news/canada-overwhelmed-with-tridemic-of-covid-19-flu-and-respiratory-syncytial-virus/articleshow/95990833.cms">Canada overwhelmed with 'tridemic' of Covid-19, flu and respiratory syncytial virus</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/jio-haptik-aims-to-turn-profitable-before-listing/articleshow/95975823.cms">With an eye on listing in the future, Jio Haptik trains guns on growth &amp; profitability</a>

You Searched For "RBI policy" and got 7 results

Status-quo on interest rate likely, say experts ahead of RBI's policy review

PTI

Rupee rises 9 paise to close at 83.30/USD post-RBI policy decision

PTI

Loan-to-deposit ratio will subside on its own in coming months, notes Motilal Oswal report

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Sensex gains marginally to scale new peak after RBI policy decision

PTI

It's just a pause not a pivot, says Shaktikanta Das on RBI's status quo

PTI

Rupee slumps 76 paise to close at 82.61 against US dollar

PTI

Bank of Baroda expects 25-35 basis points rate hike from Dec 5-7 RBI policy meet

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