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<ul><li><keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> has said that 25% of the amount of I-CRR maintained by banks will be released on Saturday and another 25% on September 23. </li><li>Releasing money in tranches helps to smoothen out liquidity and avoid sudden gush of funds, says Madan Fadnavis of Bank of Baroda.</li><li></li></ul> The Reserve Bank on Friday decided to discontinue the <keyword id="18349664" type="General" weightage="50" keywordseo="incremental-cash-reserve-ratio" source="Orion">Incremental Cash Reserve Ratio</keyword> (I-CRR), which was put in place to absorb surplus liquidity following the withdrawal of Rs 2,000 currency notes, in a phased manner beginning Saturday. On August 10, the RBI mandated banks to maintain an incremental cash reserve ratio (I-CRR) of 10% on the increase in their net demand and time liabilities (<keyword id="312584" type="General" weightage="20" keywordseo="NDTL" source="Orion">NDTL</keyword>) between May 19, 2023 and July 28, 2023. The measure was intended to absorb the surplus liquidity generated by various factors, including the return of Rs 2,000 notes to the banking system. "On a review, it has been decided to discontinue the I-CRR in a phased manner," the central bank said in a statement. There is surplus liquidity in system of around Rs 75,000 cr of late, according to Madan Sabnavis, chief economist at Bank of Baroda. He adds, "Releasing money in tranches helps to smoothen out liquidity and avoid sudden gush of funds." Based on an assessment of current and evolving liquidity conditions, it has been decided that the amounts impounded under the I-CRR would be released in stages so that system liquidity is not subjected to sudden shocks and money markets function in an orderly manner, it added. The RBI said 25% of the amount of I-CRR maintained by banks will be released on Saturday and another 25% on September 23. The rest will be released on October 7. While announcing the I-CRR, RBI Governor <keyword id="6359111" type="General" weightage="50" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> had indicated that the provision was a temporary measure for managing the liquidity overhang. The RBI had announced that the I-CRR would be reviewed on September 8, 2023, or earlier with a view to returning the impounded funds to the banking system ahead of the festival season. Following the withdrawal of the Rs 2,000 notes, the liquidity with the banks had surged significantly, the I-CRR was aimed to absorb the excess cash. As much as 93% of Rs 2000 currency notes that were in circulation on May 19 -- the day when the currency was withdrawn from circulation -- have been returned to banks. The advance tax payments are due next week which will put pressure on liquidity further. The total value of Rs 2000 banknotes received back from circulation is Rs 3.32 lakh crore up to August 31, 2023. Fadnavis adds, "The question is whether this will be adequate next week when there are tax outflow. This is because the amount coming in of around Rs 25-27,000 cr will cover the outflow through the V3R today and will not leave much surplus." (With text inputs from PTI)

RBI decides to withdraw incremental CRR in phased manner and release it by Oct 7

The <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) on Wednesday announced a series of measures to boost foreign exchange inflows. The central bank said that it has taken the steps in order to further diversify and expand the sources of <keyword id="6358355" type="General" weightage="20" keywordseo="forex" source="Orion">forex</keyword> funding so as to mitigate volatility and dampen global spillovers. India's foreign exchange reserves stood at $593.3 billion as on June 24, 2022, supplemented by a substantial stock of net forward assets, it said. The RBI has exempted incremental Foreign Currency Non-Resident Bank (FCNR-B) and Non-Resident (External) Rupee (NRE) deposit <keyword id="127684" type="General" weightage="20" keywordseo="Liabilities" source="Orion">liabilities</keyword> for computation of Net Demand and Time Liabilities (NDTL) for maintenance of cash reserve ratio (<keyword id="35038" type="General" weightage="20" keywordseo="crr" source="Orion">CRR</keyword>) and statutory liquidity ratio (<keyword id="46197" type="General" weightage="20" keywordseo="SLR" source="Orion">SLR</keyword>) by the banks. This will be effective from the reporting fortnight beginning July 30, 2022 with reference base date of July 1. "This relaxation will be available for deposits mobilised up to November 4, 2022. Transfers from Non-Resident (Ordinary) (NRO) accounts to NRE accounts shall not qualify for the relaxation," the RBI said. It also decided to temporarily permit banks to raise fresh FCNR(B) and NRE deposits without reference to the extant regulations on interest rates, with effect from July 7, 2022. This relaxation will be available for the period up to October 31, 2022. The RBI also relaxed rules relating to foreign portfolio investment in debt by allowing all new issuances of government securities (G-Secs) of 7-year and 14-year tenors, including the current issuances of 7.10 per cent GS 2029 and 7.54 per cent GS 2036, under the Fully Accessible Route (FAR). It also decided that <keyword id="6362476" type="General" weightage="20" keywordseo="investments" source="Orion">investments</keyword> by FPIs in government securities and corporate debt made till October 31, 2022 will be exempted from the macroprudential short term limit - not more than 30 per cent of investments each in government securities and corporate bonds can have a residual maturity of less than one year. These investments will not be reckoned for the short term limit till maturity or sale of such investments. As part of the macroprudential framework under the medium term framework (MTF), foreign portfolio investors (FPI) can invest only in corporate debt instruments with a residual maturity of at least one year. The central bank has decided that FPIs will be provided with a limited window till October 31, 2022 during which they can invest in corporate money market instruments viz., commercial paper and non-convertible debentures with an original maturity of up to one year. The FPIs can continue to stay invested in these instruments till their maturity/sale. These investments will not be included for reckoning the short term limit for investments in corporate securities. According to the RBI, Authorised Dealer Category-1 (AD Cat-I) banks can utilise overseas foreign currency borrowings (OFCB) for lending in foreign currency to entities for a wider set of end-use purposes, subject to the negative list set out for external commercial borrowings (ECBs). The measure is expected to facilitate foreign currency borrowing by a larger set of borrowers who may find it difficult to directly access overseas markets. This dispensation for raising such borrowings is available till October 31, 2022. As regards the external commercial borrowings (ECB) the RBI has temporarily increased the limit under the automatic route from $750 million or its equivalent per financial year to $1.5 billion. The all-in cost ceiling under the ECB framework is also being raised by 100 basis points, subject to the borrower being of investment grade rating. The above dispensations are available up to December 31, 2022. SEE ALSO : <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/environment/news/monsoon-rain-wreaks-havoc-in-himachal-and-karnataka-orange-alert-in-gujarat/articleshow/92704563.cms">Monsoon rain wreaks havoc in Himachal and Karnataka, orange alert in Gujarat</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/news/macbook-air-with-m2-chip-will-go-on-sale-from-july-15/articleshow/92704253.cms">Apple’s MacBook Air with M2 chip will go on sale from July 15, pre-orders starting July 8</a>

RBI tries to boost forex reserves by easing NRI deposit norms

<ul><li>The <keyword id="6369693" type="General" weightage="20" keywordseo="mpc" source="Orion">MPC</keyword> has unanimously decided to keep the rates unchanged.</li><li>The central bank paused its rate hike cycle in February this year.</li><li>Economists expected MPC to stay with the ‘pause’ on interest rates, with fresh risks to inflation. GDP growth projection retained at 6.5%. </li></ul>The Reserve Bank of India’s (<keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword>) rate setting panel kept the policy <keyword id="43352" type="General" weightage="20" keywordseo="repo-rate" source="Orion">repo rate</keyword> unchanged at 6.5% on Friday. The <keyword id="6357126" type="General" weightage="20" keywordseo="monetary-policy" source="Orion">Monetary Policy</keyword> Committee (MPC) has unanimously decided to keep the rates unchanged in the October meeting. There is no change in its stance either - it is retained at withdrawal of accommodation. The central bank also announced that it was withdrawing its incremental cash reserve ratio (ICRR), which was introduced in August to withdraw surplus liquidity from the system. “It’s a status quo policy but there are many aspects that I will spell out which will reveal our approach to the global headwinds,” said Shaktikanta Das, governor of RBI. This is the fifth time that the MPC has kept policy rates unchanged since February. The MPC has remained focussed on withdrawal of accommodation. “India is poised to be the growth engine of the world. Need of the hour is to remain vigilant. High inflation is a major risk and MPC is focussed on aligning it to the 4% target,” Das added. The RBI projects India’s GDP to grow at 6.5% in FY24. CPI inflation is projected to be at 5.4% for the financial year, which remains unchanged. The Reserve Bank of India’s rate setting panel was expected to stay with the ‘pause’ on interest rates, as fresh risks have emerged to inflation. The central bank has paused its rate hike cycle in February this year. In August, India's retail inflation moderated to 6.8% from a high of 7.4% in July. The lower inflation print was due to a fall in the prices of vegetables after they went through the roof in July on patchy rains in some parts of the country. Just as it seemed that inflation was cooling in August, 30% higher crude oil prices and a stronger dollar will have worsened the outlook for inflation in the future. Higher crude prices have a cascading effect on goods that need to be transported. Economists expect September’s inflation data to remain above the RBI’s upper tolerance band. CareEdge Ratings expects the RBI to miss its Q2 inflation projections by nearly 60 basis points and will consequently revise its whole-year projection to 5.6% from an earlier projection of 5.4%. Even though the risks to inflation remain elevated, the MPC was expected to hike rates as many other central banks have done in the last few months. However, in the face of rising global bond yields, ever strengthening dollar index and higher crude oil prices, debt market experts expect RBI to continue with 'withdrawal of accommodation'”policy stance. Systemic liquidity will be tightened further in the second half. The market did not, therefore, expect RBI to take any permanent liquidity withdrawal measures. Systemic liquidity, which had been in surplus at ₹2.1 trillion during the August MPC meeting, transitioned into a deficit of ₹1.5 trillion by 27 September. This shift has increased money market rates, with the overnight call money rate rising from 6.4% to 6.8%. The RBI announced that it would implement an incremental cash reserve ratio (I-CRR) in its August MPC meeting, which sucked out liquidity to the tune of ₹1.1 trillion from the banking system. Despite the gradual withdrawal of the I-CRR, systemic liquidity continued to stay in the deficit since mid-September due to quarterly tax outflows. The central bank’s interventions in the foreign exchange market have marginally contributed to some absorption of rupee liquidity. The RBI was also expected to retain the GDP forecast for the full financial year at 6.5% as headwinds have not yet settled. The central bank will wait to see data emerging after the festive season and output from the kharif season before changing forecast again.

RBI’s MPC maintains status quo, keeps repo rate unchanged

<ul><li>The last <keyword id="30067" type="General" weightage="40" keywordseo="rbi" source="Orion">RBI</keyword> update says that 93% of the ₹2,000 notes are back with the central bank.</li><li>The ₹2,000 notes were first introduced during the <keyword id="3315394" type="General" weightage="50" keywordseo="demonetisation" source="Orion">demonetisation</keyword> exercise.</li><li>The deadline to deposit the notes is on September 30, 2023.</li></ul> With a couple of weeks to go before the deadline to deposit ₹2,000 banknotes, e-commerce giant Amazon has said that it has discontinued accepting them. Till now, many retailers along with e-commerce players, petrol pumps and even jewellers had generously started accepting these notes after RBI withdrew them in May, without banning them. However, with the festive season upon us, fewer and fewer retailers will be accepting the mega note at shops and stores and most people with residual notes will have to hit banking channels to deposit them. As of now, 93% of these notes accounting to ₹3.32 lakh crore are back with banks, said the latest RBI update on it, released in early September. “Consequently, the value of ₹2,000 banknotes in circulation as at the close of business on August 31, 2023 stood at ₹24,000 crore,” read RBI’s statement. Most of these notes had ended up with banks, which made the banking regulator come up with a temporary measure to mop up excess liquidity from the banks in its August 10 credit policy meeting update. The RBI said that scheduled banks shall maintain an incremental cash reserve ratio (I-CRR) of 10%. The new measure had come into effect the fortnight starting August 12, and the RBI has already decided to <a href="https://www.newindianexpress.com/business/2023/sep/09/rbi-to-withdraw-incremental-crr-in-phases-by-october-7-2613205.html">withdraw ICRR in a phased manner</a>. The RBI first introduced the 2000 rupee note as part of the demonetisation exercise on November 8, 2016. Currently, this is the highest currency note in circulation. The note was introduced as the ₹500 and ₹1,000 notes were withdrawn from the system to boost currency circulation. Now, with the circulation problem a thing of the past, the note has been withdrawn. Some history of updates 2017: The Indian central bank added a new security feature -- a fluorescent strip that glows green under ultraviolet light. 2018: RBI changed the design of the note with a portrait of Mahatma Gandhi on the front and a map of India on the back. 2019: Another security feature was added: a tactile strip that can be felt by people with visual impairments.

As the deposit deadline approaches, ₹2,000 notes fade from the system

Mumbai, Feb 27 () Following some banks seeking clarity on the computation of CRR to be exempted for incremental lending to three specified retail loans, the Reserve Bank has said that the deduction is available only on the equivalent incremental credit to these segments. In its bid to boost retail credit flow, the RBI on February 6 announced that incremental loans towards automobile purchases, residential housing and loans to MSMEs will be set against the mandatory cash reserve ratio (CRR), which is parked with the RBI on a permanent basis and on which banks earn no interest. This means that for any fresh loan to these three segments, the banks need not set aside the mandatory 4 per cent of deposits as CRR. Subsequently on February 10, the RBI had clarified that the CRR exemption will be for five years from the date of the origination of the loan or the tenure of the loan, whichever is earlier, and that the incremental credit to these segment can be deduction from their NDTL for six months beginning with the fortnight beginning January 31, 2020 and ending the fortnight to July 31, 2020. "It is clarified that the CRR exemption is available only on equivalent incremental credit to the three identified segments and its computation is based on the difference between the outstanding credit to these segments as of January 31, 2020 and the subsequent fortnights up to July 31, 2020," the RBI said in a clarification. On computing the equivalent amount of incremental credit that can be deducted/exempted from CRR, the regulator said it can be done on every reporting Friday beginning February 14, 2020 and up to the reporting Friday ending July 31, 2020 and thus be deducted from the outstanding credit to the respective segments as on January 31, 2020. "If the difference between the outstanding credit is positive, the equivalent amount of difference be deducted from NDTL for the purpose of CRR maintenance. If the difference in credit to any of the specified segment is negative, it should be ignored. The incremental credit will be calculated segment-wise," RBI said. The RBI also said the incremental loans to the factoring units of MSMEs discounted under the trade receivables discounting system (TReDs) are also eligible for CRR exemption. On how long such deductions/exemptions are allowed, the RBI said the amount of incremental credit as of July 31, 2020 (over the outstanding credit as of January 31, 2020) will be reduced to the extent of repayments and NPAs and the net amount of incremental credit will be eligible for deduction from NDTL for up to five years--up to the fortnight ending January 24, 2025, or the tenure of the loan, whichever is earlier. BEN MRMR

CRR-exempted loans: RBI says deduction only on incremental lending

Mumbai, Feb 10 () The Reserve Bank on Monday said the special lending window with CRR exemption will be open from February 14 and incremental loans disbursed under this facility will have CRR exemption for the next five years. This means that banks will not be needed to make additional cash reserve ratio against any incremental loans disbursed to the targeted segments. The window opens on February 14 for six months ending July 31, 2020, but the net demand and time liabilities (NDTL) will be calculated as of January 31, 2020, the central bank circular said this evening. As an additional liquidity measure and also to nudge banks to lend more to the needy segments, the Reserve Bank at the last monetary policy announcement said banks, flushed with liquidity, could lend to these segments without making additional provisions without the requirement of parking additional cash reserve ratios (CRR), which is the money parked with the RBI without interest. The productive sectors identified by the regulator are auto and residential housing loans, and also loans to micro, small and medium enterprises (MSMEs). At the sixth bimonthly monetary policy on February 6, the RBI had said, "Banks can deduct the equivalent amount of incremental credit disbursed by them as retail loans to automobiles, residential housing, and loans to MSMEs (which have GST registration), over and above the outstanding level of credit to these segments as at the end of the fortnight ended January 31, 2020, from their net demand and time liabilities (NDTL) for maintenance of the CRR." Detailing the time-line and operational details in a detailed circular, the RBI on Monday said, "Banks can claim the first such deduction from the NDTL of February 14, 2020 for the amount equivalent to the incremental credit extended to the above identified sectors over the outstanding level of credit as at the end of the fortnight to January 31, 2020. "An amount equivalent to the incremental credit outstanding from the fortnight beginning January 31, 2020 and up to the fortnight ending July 31, 2020 will be eligible for deduction from NDTL for the purpose of computing the CRR for a period of five years from the date of origination of the loan or the tenure of the loan, whichever is earlier," the RBI said. The central bank feels revitalising credit flow to productive sectors like these can have multiplier effects to spur support growth. The circular asks banks to report the CRR exemption availed at the end of a fortnight under "exemptions/others" in the Section 42 return, under the provisions of the master circular on CRR and SLR issued on July 1, 2015. Proper fortnightly records of net incremental credit extended to these select sectors/NDTL exemption claimed, duly certified by the chief financial officer or an equivalent officer, must be maintained by banks for supervisory review, the circular said. The RBI expects this special window to enable improved credit flow to needy sectors, reinforces monetary transmission, strengthens regulation and supervision, broadens and deepens financial markets; and also improves payment and settlement systems. The RBI on June 6, 2019, set up an internal working group to review the liquidity management framework to simplify it and suggest steps to communicate the objectives and the toolkit for the same and the report was made public on September 26, 2019. Following this, RBI fine-tuned the existing liquidity management framework and the revised framework fixed the marginal standing facility rate as its upper ceiling and the fixed rate reverse repo rate as the floor rate, with the policy repo rate in the middle of the corridor. The special lending window however retains the width of the corridor is retained at 50 bps-the reverse repo rate being 25 bps below the repo and the MSF rate being 25 bps above the repo rate. This also had the RBI withdrawing the daily fixed rate repo and four 14-day term repos and included fixed and variable rate repo/reverse repo auctions, outright open market operations, forex swaps and other instruments as new instruments for liquidity management. A 14-day term repo/reverse repo operation at a variable rate and conducted to coincide with the CRR maintenance cycle would be the main liquidity management tool for managing frictional liquidity requirements. The main liquidity operation would be supported by fine-tuning operations, overnight and/or longer, to tide over any unanticipated liquidity changes during the reserve maintenance period, the RBI said, adding if needed, the RBI will conduct longer-term variable rate repo/reverse repo operations of over 14 days, and accordingly last week, it introduced long term repos with one and three years of tenor. BEN MRMR

Lending from CRR buffer to get 5-yr exemption: RBI

The <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) can argue its case strongly with the Central government as to why the <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> was not controlled at 4 per cent, said experts. The RBI's Monetary Policy Committee (MPC) will meet on November 3 to discuss what it would tell the Centre as to why it was not able to restrain the inflation. The RBI may also sound out the Central government as to the course of inflation as well as the reasons as to why it may be at the elevated levels. In <keyword id="3658" type="General" weightage="20" keywordseo="india" source="Orion">India</keyword>, the retail inflation rose to 7.41 per cent in September. Experts were of the view that a combination of global and local (glocal) factors -- geopolitical developments, crop production, reduction in crude oil production and the resulting price increase and depreciating rupee -- are expected to heat up the prices. The RBI on its part is trying to contain the inflation by increasing the repo rate -- the rate at which it lends to the banks. The central bank has increased the repo rate by 190 basis points in recent times and the last one was by 50 basis points last month. "There is a strong case for the RBI arguing that (a) inflation has primarily been caused by supply side shocks with global commodity prices having an impact (b) rupee depreciation has added to imported inflation (c) the RBI on its part was proactive in raising rates even between two policies as it did in May when it saw things were going out of hand post Ukraine war and (d) there have been some measures like increase in goods and services tax (GST) which has added to inflation that was happening in parallel," Madan Sabnavis, Chief Economist, Bank of Baroda, told IANS. "Therefore, there is an explanation as to why inflation was high. But the central bank has been acting to bring it down through the instruments it has like repo and CRR (cash reserve ratio). It has succeeded in lowering surplus liquidity too which can be proved," Sabnavis added. "The RBI can say that inflation is due to supply side constraints a nd excess liquidity," says K. Ramasubramanian, retired General Manager, RBI, and a forex advisor. "In addition, there was a huge sale of forex almost Rs 3 lakh crore to maintain the exchange rate. Inflation which was more than the target continuously for three quarters is estimated to come around 6 per cent by three more quarters. Interest rates (repo rate) have been increased almost 1.9 per cent. As such the MPC may only be constrained to say that the present steps taken need some more time for having a positive impact to reduce inflation. This is subject to the time inconsistency impact," he added. The RBI has scheduled the November 3 meeting of MPC under Section 45ZN of the RBI Act. As per the said Section, when the RBI fails to meet the inflation target, it shall send a report to the central government listing: (a) the reasons for failure to achieve the inflation target; (b) remedial actions proposed to be taken by it; and (c) an estimate of the time-period within which the inflation target shall be achieved pursuant to timely implementation of proposed remedial actions. As per the RBI Act the MPC shall determine the Policy Rate required to achieve the inflation target. Further as per the RBI Act, the central bank shall organise at least four meetings of the MPC in a year. Announcing the credit policy RBI Governor Shaktikanta Das said: "There are also upside risks to food prices. Cereal price pressure is spreading from wheat to rice due to the likely lower kharif paddy production. "The lower sowing for kharif pulses could also cause some pressures. The delayed withdrawal of monsoon and intense rain spells in various regions have already started to impact vegetable prices, especially tomatoes. These risks to food inflation could have an adverse impact on inflation expectations." According to the RBI Governor, the Indian basket crude oil price was around $104 per barrel in H1:2022-23 and expected to be around $100 per barrel in H2: 2022-23. "Taking into account these factors, the inflation projection is retained at 6.7 per cent in 2022-23, with Q2 at 7.1 per cent; Q3 at 6.5 per cent; and Q4 at 5.8 per cent, with risks evenly balanced. CPI (consumer price index) inflation is projected to further reduce to 5.0 per cent in Q1:2023-24," Das said. However, one has to see the RBI's prediction as to crude oil prices ($100 per barrel) as the oil producing countries have announced a cut in their production and the international prices going up. Economists and common man have a different take on the RBI's expectations on inflation. "Presently inflation does appear unlikely that it will move downwards for two sets of factors. The increase in oil price and rupee depreciation has potential to increase imported inflation," Sabnavis had told IANS earlier. "Second, there have been some shortfalls in kharif production which will mean an increase in prices. Also the late withdrawal of rain has affected vegetable crops and also adversely affected the harvest of rice and oilseeds in some regions." The reduction in sown area for rice and pulses during Kharif season is expected to feed inflation in the coming months. The overall sown acreage for the Kharif season has declined by 0.8 per cent at the end of September 30, 2022 as compared to last year, the Bank of Baroda said in a recent report. "The inflation rate will be 6.5-7 per cent in FY23 and 5.5-6 per cent in FY24," Sabnavis had remarked. The RBI Governor had said the communication with the central government is a privileged one and it will not made public by the Bank. Das also said there no legal stipulation on the frequency of the communication between RBI and the government. He had earlier said the inflation rate is expected to come down to four per cent in two years time. There are many uncertainties. The RBI has pegged the inflation rate at 6.7 per cent for FY23. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/apple-surges-to-add-178-billion-in-market-value-as-4th-quarter-earnings-help-drive-a-turnaround-in-the-stock-market/articleshow/95153518.cms">Apple surges to add $178 billion in market value as 4th-quarter earnings help drive a turnaround in the stock market</a> <a href="https://www.businessinsider.in/stock-market/news/the-fed-will-hike-rates-too-far-and-tip-the-global-economy-into-a-recession-survey-of-economists-says/articleshow/95151308.cms">The Fed will hike rates too far and tip the global economy into a recession, survey of economists says</a> <a href="https://www.businessinsider.in/thelife/news/see-inside-an-almost-1-million-prefab-tiny-home-village-near-seattle-trying-to-solve-the-ongoing-homelessness-crisis/slidelist/95153993.cms">See inside an almost $1 million prefab tiny home village near Seattle trying to solve the ongoing homelessness crisis</a>

RBI can argue its case on inflation control say experts

Mumbai, Mar 27 () The Reserve Bank of India (RBI) on Friday cut benchmark interest rate by 75 basis points to 4.4 per cent to deal with the hardship caused due to the outbreak of COVID-19. The central bank also reduced the cash reserve ratio (CRR) of all banks by 100 basis points to 3 per cent with effect from March 28 for 1 year. RBI will maintain accommodative stance, Governor Shaktikanta Das said while announcing decisions of Monetary Policy Committee (MPC). "MPC voted for sizeable reduction in interest rate," he said. DP ANZ ANSANS

RBI cuts repo rate by 75 bps to 4.4 pc; slashes CRR by 100 bps

Economists are of the view that the measures taken by the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) have controlled inflation and add that inflation will come down. A senior economist also said the headline inflation could be 7.5 per cent in December putting a spanner in the inflation projections of the central bank. The RBI's Monetary Policy Committee (MPC) will meet on November 3 to discuss what it would tell the Centre as to why it was not able to restrain the inflation within four per cent + or - two per cent for three consecutive quarters. The RBI may also sound out to the Central government as to the course of inflation as well as the reasons why it may be at elevated levels. India's central bank has been trying to contain inflation by increasing the repo rate -- the rate at which it lends to the banks. The central bank has increased the repo rate by 190 basis points in recent times and the last one was by 50 basis points. In India, the retail inflation rose to 7.41 per cent in September. "The measures taken by the government and RBI have been able to control inflation from the high of 7.8 per cent we had seen in April. The fall in global commodity prices has also been supported in containing inflation. Inflationary expectations have also come down," Rajani Sinha, Chief Economist, CARE Ratings Ltd told IANS. "However, the concern is the stickiness of core inflation above six per cent and the renewed surge in domestic food inflation in the last few months. The measures taken by RBI to control inflation will show further impact with a lag of a few quarters," she added. "There is a strong case for the RBI arguing that (a) inflation has primarily been caused by supply-side shocks with global commodity prices having an impact (b) rupee depreciation has added to imported inflation (c) the RBI on its part was proactive in raising rates even between two policies as it did in May when it saw things were going out of hand post-Ukraine war and (d) there have been some measures like increase in goods and services tax (GST) which has added to inflation that was happening in parallel," Madan Sabnavis, Chief Economist, Bank of Baroda, told IANS. "Therefore, there is an explanation as to why inflation was high. But the central bank has been acting to bring it down through its instruments, like repo and CRR (cash reserve ratio). It has succeeded in lowering surplus liquidity too which can be proved," Sabnavis added. "There was a huge sale of forex almost Rs 3 lakh crore to maintain the exchange rate. Inflation which was more than the target continuously for three quarters is estimated to come to around 6 per cent by three more quarters. Interest rates (repo rate) have increased by almost 1.9 per cent. As such the MPC may only be constrained to say that the present steps taken need some more time for having a positive impact to reduce inflation. This is subject to the time inconsistency impact," K. Ramasubramanian, retired General Manager, RBI, and a forex advisor told IANS. According to Sinha, the CPI inflation is estimated to inch below seven per cent in the next few months due to the base effect and below six per cent by the end of the fiscal year. Looking ahead, Sinha said the RBI could hike the repo rate further by 25-50 bps in the current fiscal year. "As we approach closer to the neutral policy rate, RBI will get more cautious in its rate decision," she added. Citing the unseasonal rain affecting the Kharif crops and the September food inflation at 8.4 per cent Dr Soumya Kanti <keyword id="4757" type="General" weightage="50" keywordseo="ghosh" source="Orion">Ghosh</keyword>, Group Chief Economic Adviser, <keyword id="6354731" type="General" weightage="50" keywordseo="state-bank-of-india" source="Orion">State Bank of India</keyword> said in 2019 when such rains happened, the average food prices more than doubled from 4.9 per cent to 10.9 per cent. Similarly, the headline inflation in December could be 7.5 per cent and could put a spanner to the inflation projections of RBI and market consensus, Ghosh said in a research report. "This could also mean that the terminal repo rate could still be difficult to comprehend at this time, though consensus puts it at 6.5 per cent," Ghosh said. According to Sinha, the <keyword id="6356435" type="General" weightage="50" keywordseo="us-federal-reserve" source="Orion">US Federal Reserve</keyword>'s policy decisions and the consequences on the currency market will also have a bearing on RBI's future policy decisions. Economists said the MPC will not be deciding on the policy rate at their November 3 meeting. "With global commodity prices falling and the likely support of base effect in containing India's CPI inflation in the next few months, RBI is unlikely to be in a tearing hurry," Sinha added. 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RBI measures controlled inflation, but challenges remain say economists

<ul><li>Over the years, India has changed from a cash-led economy to a smartphone-led payment economy, says SBI Ecowrap. </li><li>Lower currency in circulation results in less leakage of deposits and it will impact monetary transmission positively, it adds. </li><li>In FY16, the share of currency in circulation (CIC) in payment systems was at 88%. This has come down to 20% in FY22. </li></ul> For the first time since 2002 – that’s 20 years – currency in circulation has declined during the Diwali week, says a report by SBI Ecowrap. This is, however, barring a marginal decline seen in the same period in 2009 because of economic slowdown. “Indian economy is undergoing a structural transformation. The innovations in technology have changed the Indian payment system. Over the years, the Indian cash-led economy now has changed to (a) smartphone-led payment economy,” the report said, calling it a remarkable development. This coincides with a record high in terms of value of UPI transactions in October 2022 – 7.3 billion transactions to the tune of ₹12.11 trillion – growing by 73% year-on-year <a href="https://www.business-standard.com/article/finance/upi-processes-over-7-bn-transactions-in-oct-record-high-since-inception-122110100569_1.html"> in volume terms</a>. Digital transactions turn faster, cheaper and easier Over the years, digital payments have become cheaper and easier and even brought those without bank accounts into the system. Moreover, the interoperable payment systems like UPI, wallets and prepaid payment instruments or PPIs have made the process simpler. As per the report, small retail payments done through UPI/e-wallets account for around 11-12% of the payment industry. Moreover, the share of cash in payment systems has reduced drastically in the last six years. In FY16, the share of currency in circulation (CIC) or cash transactions in payment systems was at 88% - this was prior to the launch of UPI in 2016. This share has come down to 20% in FY22. Moreso, it’s estimated to go down to 11.5% by FY27. Subsequently, the share of digital transactions that have been defined as IMPS, UPI and PPI by the report – have increased substantially. These transactions were at 11.26% in FY16 - and went up to 80.4% in FY22. It is expected to touch 88% in FY27. Clearly, digital transactions are taking the place that cash once held. “The success of the digital journey is primarily due to the relentless push by the Government to formalise and digitalise the economy. Over the years, the system has expanded rapidly with new innovations like QR code, NFC etc and has also seen the swift entry of big tech firms in this industry,” the report said. Less cash to print India has always been an economy with high cash in circulation. It comes next only to Japan and Hong Kong in terms of currency <a href="https://timesofindia.indiatimes.com/business/india-business/high-cash-in-circulation-aids-current-rbi-policy/articleshow/92641909.cms">in circulation (CIC) as a percentage </a>of GDP, which was at 14.2% in FY22, as per RBI data. As this percentage reduces and the economy is formalised, it can aid the banking system. “In simple terms, it implies that the RBI has to print less of currency given that UPI transactions impact currency in circulation with a lag. This is a win-win for both RBI and government, as it results in saving of seigniorage costs and also a less cash economy,” the report said. Currently, liquidity estimation of the country is impacted by a high amount of cash in the system, which is not easy to account for. Without a currency leakage, this estimation can now see a fundamental reorientation, the report says. “A lower currency in circulation also is akin to a CRR cut for the banking system, as it results in less leakage of deposits and it will impact monetary transmission positively,” the report said. CRR or cash reserve ratio is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. Apart from encouraging digital payments via UPI, the RBI is also currently working on piloting a Central Bank Digital Currency (CBDC) or the digital rupee. The RBI governor Shaktikanta Das said that it can transform the way the business is done. “It was indeed a landmark moment in the history of money, in the history of currency in our country. Going forward, it will be a landmark achievement so far as the functioning of the entire economy is concerned,” Das said on November 2.

Diwali week cash circulation declines for the first time in 20 years: SBI Ecowrap

The <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword>'s (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) move to relax regulations to boost foreign exchange inflows will not have any material change in receipts, but certainly helpful in directional forex signalling to speculators, said <keyword id="141615" type="General" weightage="80" keywordseo="emkay-global" source="Orion">Emkay Global</keyword> Financial Services Ltd. Reacting to RBI's moves on Wednesday, Emkay Global in a report said: "While these measures to boost capital account are helpful, they may not have a material impact on flows. Nonetheless, they will still ease the pressure of the RBI to intervene to some extent." According to Emkay Global, with low forward premia, this mobilisation may still make some sense for banking entities. The timing of RBI's move coincides with the typically strong remittance/deposit season that comes with the beginning of the festive season. This can take the pressure off banks to raise domestic deposits amidst accelerating credit growth, and also somewhat cool-off domestic borrowing rates, Emkay Global said. The easing of all the available channels of foreign portfolio investors (<keyword id="725142" type="General" weightage="50" keywordseo="fpi" source="Orion">FPI</keyword>) investments in debt may not lead to material change in FPI flows given the free limits that are already available. However, the new tenors added in Fully Accessible Route (FAR) securities are fairly active. "Thirdly, the all-in cost ceiling under the <keyword id="60971" type="General" weightage="50" keywordseo="ecb" source="Orion">ECB</keyword> (external commercial borrowings) framework is also being raised by 100 bps, subject to the borrower being of investment grade rating, however we seek more clarity on this front as to whether it leads to any change in caps (from existing 450bps), and if it makes sense for domestic good investment-grade borrowers to borrow in foreign currency, except when they are facing a credit crunch back home," the report said. While it is debatable if these steps can lead to significant flows, they could be effective in preventing speculative attacks on the currency and giving directional policy signals to the markets, Emkay Global added. The key measures announced by RBI on Wednesday were: 1. Cash Reserve Ratio + Statutory Liquidity Ratio (CRR+ SLR) exemptions: Incremental FCNR Bank and Non-Resident External (NRE) deposit liabilities now exempt from <keyword id="626944" type="General" weightage="50" keywordseo="net-demand-and-time-liabilities" source="Orion">Net Demand and Time Liabilities</keyword> (NDTL) computation for maintenance of CRR and SLR. Transfers from Non-Resident Ordinary (NRO) accounts will not qualify for this relaxation. This relaxation is available till November 4, 2022. 2. Interest rates on FCNR and NRE deposits: Banks are temporarily allowed to raise fresh FCNR(B) and NRE deposits without having to adhere to the regulations on interest rates on these deposits. 3. FPI debt investment: Easing all the available channels of FPI investments: (i) All new issuances of 7-year and 14-year G-secs (including fairly active current issuances of 7.10 per cent GS 2029 and 7.54 per cent GS 2036 <keyword id="1351125" type="General" weightage="50" keywordseo="ato" source="Orion">Ato</keyword> be now covered under Fully Accessible Route (FAR). At present, 5-year, 10-year and 30-year tenors are covered. (ii) FPI investments in G-secs and corporate debt will not be subject to the short-term limit, i.e., not more than 30 per cent of investments in G-secs and corporate debt can have a residual maturity less than one year. (iii) FPIs can invest in commercial papers and non-convertible debentures with an original maturity of up to one year as against earlier mandate of at least one year. These investments will not be included as part of the short term limit on investments in corporate securities. 4. Foreign currency lending by banks: Banks can utilise overseas foreign currency borrowings (OFCBs) for lending for a wider set of purposes, not just export finance. The measure is expected to facilitate foreign currency borrowing by a larger set of borrowers who may find it difficult to directly access overseas markets. 5. ECB limits: The limit for ECBs under the automatic route has been raised from $750 million to $1.5 billion per financial year. The all-in cost ceiling has also been raised by 100bps. The measures 2-5 above are valid till 31st October 2022, Emkay Global said. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/stopped-russian-imports-in-april-says-essar-oil/articleshow/92714422.cms">Stopped Russian imports in April says Essar Oil</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/space/news/elon-musk-is-confident-that-humanity-will-reach-mars-in-our-lifetime/articleshow/92714414.cms">Elon Musk is confident that humanity will reach Mars in our lifetime</a>

RBI's moves to boost forex inflows could have an impact on domestic borrowing rates

The <keyword id="6354335" type="CITY" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (<keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>) cut repo rate by 25 bps to 6.25% and now banks have to be active in passing it to the consumers so that people, especially the home-buyers, benefit from the interest rate cut. 
 The repo rate cut by <keyword id="3715773" type="UNKNOWN" weightage="20" keywordseo="rbi-governor-urjit-patel">RBI Governor Urjit Patel</keyword> has indeed come as a good news for home-buyers as <keyword id="6388045" type="COMPANY" weightage="20" keywordseo="emis">EMIs</keyword> are now expected to go down. 
 
Now, it all depends on the banks as since 2015, despite the RBI slashing the repo rate by 1.50%, the banks have passed on a mere 0.5%. 
 
However, one of the main losers due to the repo rate cut will be people having Fixed Deposits (FDs). This is because, with a lower repo rate, banks will also cut the deposit rate if liquidity is comfortable. This will impact depositors and investors and is expected that the interest on FDs will fall in the immediate future. 
 
If you are still confused on all the repo rates and Cash Reserve Ratio (CRR), here’s the simplified version: 
 
Repo rate: 
Repo rate is the rate at which the RBI lends money to the banks when there is fund crunch and is cut or increased, keeping the inflation in mind. So, if inflation is high and banks increase the repo rate, banks will have to take money from the RBI at a higher rate. 
 
Reverse repo rate: 
Reverse repo rate is the rate at which the RBI borrows money from the banks. If the Reverse repo rate goes up, banks will get more money to park their funds with the central bank. 
 
Cash Reserve Ratio (CRR): 
CRR is the minimum amount that banks have to keep from the total deposits of customers. This goes in the current account of the banks and they do not earn any interest on this. Presently, the CRR is at 4%. 
 
So, how does this affect you? 
 
Home-loans and Auto loans: If banks pass on the rates, consumers will benefit from the cumulative effect. EMIs will fall as banks will also lower down their lending rate as it all depends on banks’ marginal cost of funds based on lending rates. 
 
FD investors: This is impact the fixed deposits as the banks will have to cut rates on the FDs and people will earn less interest.

Decoded: Here’s how repo rate cut will help home-buyers and affect FD investors

Governor of Reserve Bank of India (RBI) Raghuram Rajan kept the repo rate and <keyword id="3228880" type="UNKNOWN" weightage="20" keywordseo="CRR-unchanged">CRR unchanged</keyword>. 
 Announcing the sixth bi-monthly monetary policy, Rajan said the central bank was still ‘accommodative’ and also looked forward to <keyword id="6360189" type="COMPANY" weightage="20" keywordseo="Union-Budget">Union Budget</keyword> on February 29. 
 
Rajan said the budget needed to support growth and check spending. 
 "The Reserve Bank continues to be accommodative even as it leaves the policy rate unchanged in this review, while awaiting further data on the development of <keyword id="22195" type="COMPANY" weightage="20" keywordseo="Inflation">inflation</keyword>. Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth,” said Rajan. 
 
Rajan said the growth had also slowed due to several reasons including stalled projects and dampened exports. He also said the growth would gain momentum by the end of FY17. 
 
The central bank did not factor in the recommendations of the pay panel. 
 
Here are reasons why the RBI maintained status quo 
 
1. Economic activity: On the domestic front, Indian economic activity lost momentum in Q3 of 2015-16, pulled down by dampened agricultural and industrial growth. In the first two months of Q3 of 2015-16, industrial activity slowed due to weak investment. 
 
2. Weak monsoons: The north-east monsoon season ended in December with a deficiency of 23 per cent relative to the long period average (LPA). Rajan stated that rural incomes would continue to be supported by allied activities such as dairy and horticulture, which now contribute as much to <keyword id="35050" type="CITY" weightage="20" keywordseo="gdp">GDP</keyword> as food grains. “A good monsoon next year could pull the inflation down,” said Rajan. 
 
3. CPI inflation: The CPI inflation rose for the fifth month in December. The CPI inflation, excluding food and fuel, rose for the fourth successive month. 
 
4. Liquidity: The liquidity conditions tightened with advance tax outflows. Rajan said will use all liquidity instruments to ensure sufficient liquidity supply. 
 
5. Exports: Indian exports were in contraction mode for the 13th successive month in December. 
 
6. Global growth: The global growth had slowed. World trade has remained subdued and there were new lows in commodity prices and currency realignments. In the US, an improving labour market continues to support a consumption-led recovery. In the Euro area, core inflation and wage growth were subdued. In China, growth in Q4 of 2015 was the slowest since 2009, pulled down by manufacturing, residential investment and exports. EME commodity exporters confront recessionary conditions, falling currencies, sluggish exports and still high inflation relative to their recent histories.

You Searched For "crr rbi" and got 13 results

RBI decides to withdraw incremental CRR in phased manner and release it by Oct 7

BI India Bureau

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IANS

RBI’s MPC maintains status quo, keeps repo rate unchanged

Katya Naidu

As the deposit deadline approaches, ₹2,000 notes fade from the system

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CRR-exempted loans: RBI says deduction only on incremental lending

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Lending from CRR buffer to get 5-yr exemption: RBI

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RBI can argue its case on inflation control say experts

IANS

RBI cuts repo rate by 75 bps to 4.4 pc; slashes CRR by 100 bps

PTI

RBI measures controlled inflation, but challenges remain say economists

IANS

Diwali week cash circulation declines for the first time in 20 years: SBI Ecowrap

Katya Naidu

RBI's moves to boost forex inflows could have an impact on domestic borrowing rates

IANS

Decoded: Here’s how repo rate cut will help home-buyers and affect FD investors

Akanksha Jain

6 reasons why RBI Raghuram Rajan maintained status quo

BI India Bureau

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