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The Reserve Bank of India's (<keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword>) Monetary Policy Committee (MPC) is expected to change its stance after taking a guard against inflation by delivering a 25 basis points (bps) hike in the repo rate on April 6, said economists. "There will be a 25 bps increase (in repo rate) and change in stance -- to neutral. The decision won't be unanimous as last time. There will be a pause after the hike," <keyword id="170005" type="General" weightage="50" keywordseo="madan-sabnavis" source="Orion">Madan Sabnavis</keyword>, Chief Economist, Bank of Baroda told IANS. The MPC is likely to change policy stance to 'neutral', with a non-committal forward guidance, said <keyword id="4921330" type="General" weightage="50" keywordseo="madhavi-arora" source="Orion">Madhavi Arora</keyword>, Lead Economist, Emkay Global Financial Services. <keyword id="176" type="General" weightage="80" keywordseo="arora" source="Orion">Arora</keyword> said, the neutral stance will give the MPC flexibility to be non-committal on forward guidance, yet subtly give direction on a 'pause'. "In our view, a 'hawkish pause' is less purposeful in sending clearer forward signaling, while a 'hawkish hike' makes even less sense from the policy perspective, amid limited macro levers and expected growth slowdown ahead," Arora said. "We reckon a part of the policy compulsion was emanating from the sharp &amp; consistent (upward) repricing of global rates and the consequent fear of INR (Indian Rupee) instability through capital account and the absent high risk-premia offered by India. Both fears are likely to diminish now, implying that the RBI can choose to pause ahead and keep policy flexibility amid a still-fluid global situation," Arora added. According to Pankaj Pathak, Fund Manager- Fixed Income, Quantum AMC, unseasonal rain, early forecasts of El-Nino, rising prices of milk and sugarcane and others are negative for the inflation outlook. On the other hand, the banking crisis in the US and Europe and the slowing growth outlook might also be considered by some members. Another 25 bps rate hike with a stance change to neutral looks like the most likely outcome, Pathak said. Continuing further he said, the bond market will focus more on the RBI's future outlook. A 25 bps rate hike is broadly in price while retention or change of stance will move the bond market. Retention of the current policy stance as 'withdrawal of accommodation' will be perceived as an indication of further rate hikes and thus will be negative for the bond market. The market will also look for the RBI's position on liquidity conditions. The banking system liquidity deficit is likely to increase during the April-June period. In absence of liquidity support from the RBI, the short-term rate can move higher meaningfully, Pathak said. SEE ALSO: <a href="https://www.businessinsider.in/business/corporates/news/tcs-infosys-hcl-tech-amongst-top-picks-of-analysts-heading-into-the-q4-earnings-season/articleshow/99235686.cms">TCS, Infosys, HCL Tech amongst top picks of analysts heading into the Q4 earnings season</a> <a href="https://www.businessinsider.in/business/corporates/news/adani-group-stocks-tumble-amid-reports-of-sebi-probe-group-market-capitalisation-falls-by-22000-crore/articleshow/99214962.cms">Adani group stocks tumble amid reports of SEBI probe: Group market capitalisation falls by ₹22,000 crore</a> <a href="https://www.businessinsider.in/business/corporates/news/india-incs-credit-quality-continues-to-shine-in-fy23-slowdown-concerns-could-impact-it-textile-sectors-says-icra/articleshow/99211589.cms">India Inc’s credit quality continues to shine in FY23: Slowdown concerns could impact IT, textile sectors, says ICRA</a>

After delivering 25 bps hike in repo rate, RBI to change its stance on April 6, say economists

<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>

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

<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

Mumbai, The <keyword id="50847" type="General" weightage="20" keywordseo="reserve-bank" source="Orion">Reserve Bank</keyword> on Friday approved Rs 87,416 crore dividend payout to the central government for 2022-23, nearly triple of what it paid in the previous year. The dividend payout was Rs 30,307 crore for accounting year 2021-22. The decision was taken at the 602nd meeting of the Central Board of Directors of Reserve Bank of India held under the chairmanship of Governor <keyword id="6359111" type="General" weightage="20" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword>. "The board approved the transfer of Rs 87,416 crore as surplus to the central government for accounting year 2022-23, while deciding to keep the Contingency Risk Buffer at 6 per cent," <keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword> said in a statement. The board also reviewed the global and domestic economic situation and associated challenges, including the impact of current global geopolitical developments. The board also discussed the working of RBI during 2022-23 and approved the annual report and accounts of the central bank for the year. Madan Sabnavis, chief economist of Bank of Baroda said that this surplus transfer will come in very handy and ensure that the government managed it fiscal numbers with relative ease given that there are question marks on the divestment programme. "The Budget had looked at a number of Rs 48,000 crore as dividend from banks and RBI. RBI has overshot this number with the transfer of Rs 87,000 cr. This was enabled by higher earnings on sale of forex during the year, better returns on forex investments in US treasuries (though value of bonds would have fallen which has to be charged to the contingency reserve), revaluation of forex assets and adjustments in reserves as per the Bimal Jalan Committee recommendations. The RBI would have had higher pay-outs due to the higher SDF rates with the system being in surplus all through the year," Sabnavis said. According to him, public sector banks have also reported very good profits and announced dividend, there will be higher flows of dividends from this source too. Add to this the possible higher dividend payments by the oil marketing companies and the situation appears quite comfortable from a market perspective as this will not lead to higher market borrowings. (With inputs from PTI)

RBI approves Rs 87,416 cr dividend payout to the government for 2022-23

The 25 basis points hike in key policy rate by <keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> is in line with expectations, and hopefully is the last in the current cycle of rate increase which started in May 2022 in view of rising inflation, opined industry bodies and experts. It was the sixth hike in a row, though the quantum was low. The central bank has cumulatively hiked repo rate by 250 basis points since May last year in a bid to contain rising inflation in the wake of global geopolitical tensions. "There is no doubt that moderating inflation in today's challenging global environment should be a priority for the RBI-Monetary Policy Committee and the RBI has done a commendable job with the result that the pace of price rise has reversed. "In line with the other broad objective of sustainable growth, we want to believe this is the last rate hike by the RBI," said Assocham Secretary General Deepak Sood. The RBI raised interest rate by 35 basis points in December 2022. It was hiked by 40 basis points in May and by 50 basis points each in June, August and September. Commenting on the RBI policy, Madan Sabnavis, Chief Economist, Bank of Baroda said the major takeaway is that there will be a prolonged pause for sure before any further action is taken by the RBI and will be data-driven. "Presently it looks like that there is an upside risk to the inflation number and hence a rate hike could be thought of later. A rate cut during the year looks more unlikely and can be on the cards only when there is a change in stance first," he added. <keyword id="15466055" type="General" weightage="50" keywordseo="saket-dalmia" source="Orion">Saket Dalmia</keyword>, President, PHDCCI opined that the continuous increase in repo rate will have impact on consumption demand and production possibilities in factories. "As inflation has been in a significant deceleration since the last many months, we look forward a pause in the policy rates," he added. The Reserve Bank has projected retail inflation to ease to 5.3 per cent in next fiscal from 6.5 per cent this year on assumptions of lower imported inflation, even though core inflation remains sticky. Experts also said repo rate is directly linked to loan rates offered by lenders so an increase in repo will increase the borrowing cost and vice-versa. "The rate hike of 25 bps today will make EMIs expensive by approximately 2-4 per cent. Borrowers will either have to shell out extra money to repay their loans or will have to extend the loan tenure," said <keyword id="2951021" type="General" weightage="50" keywordseo="v-swaminathan" source="Orion">V Swaminathan</keyword>, Executive Chairman, Andromeda Sales and Apnapaisa.com. Since May 2022, the repo rate has been increased by 250 basis points. So, the EMI for a 20-year home loan taken in May 2022 of Rs 70 lakh at 7 per cent was Rs 54,271, he explained. "But when we factor in the 250-bps hike since May, the interest rate becomes 9.50 per cent, increasing the EMI to Rs 65,249." <keyword id="11357847" type="General" weightage="50" keywordseo="radhavi-deshpande" source="Orion">Radhavi Deshpande</keyword>, President and Chief Investment Officer, Kotak Mahindra Life Insurance Company said having front loaded most of the rate hikes, incremental policy rate decisions will largely be data and global central bank stance related. Markets would settle for a longish pause here on than expect additional tightening and reversals in short period. "We expect 10 year G-Sec to hover around 7.25-4 per cent in the short term," Deshpande said. Bhavik <keyword id="1346781" type="General" weightage="50" keywordseo="thakkar" source="Orion">Thakkar</keyword>, CEO of Abans Investment Managers too said while this will increase cost of borrowing for all types of loan, the impact on home loan borrower this time could not just be extension of home loan tenor but higher EMIs also. One of the things home loan borrowers should do is ask their lender to increase spread (difference between MCLR/RPLR for home loan companies and home loan rates offered to borrower), Thakkar said. Sumita Pillai, Chief Executive Officer of Torus Private Wealth too said the RBI move was in line with expectation. "We expect the rate hike cycle to conclude as inflation has started showing signs of moderation and RBI has a clear focus on growth going forward," Pillai said. Meanwhile, Sandeep Bagla CEO, TRUST Mutual Fund said the market is a tad disappointed as there was no change in stance from "withdrawal of accommodation" to neutral. He further said market forecasters are expecting inflation to trend lower from RBI projections. The RBI will release the minutes of the six-member Monetary Policy Committee meeting on February 22, 2023. The next meeting of the MPC is scheduled for April 3-6, 2023. SEE ALSO: <a href="https://www.businessinsider.in/finance/news/rbi-hikes-interest-rates-by-25-basis-points-to-6-5-says-core-inflation-remains-sticky/articleshow/97716217.cms">RBI hikes interest rate by 25 bps to 6.5%, says core inflation remains ‘sticky’</a> <a href="https://www.businessinsider.in/business/corporates/news/adani-transmission-reports-78-rise-in-q3-net-profit-to-475-crore-on-one-time-income/articleshow/97650165.cms">Adani Transmission reports 78% rise in Q3 net profit to ₹475 crore on one-time income</a> <a href="https://www.businessinsider.in/business/telecom/news/bharti-airtel-q3-net-profit-jumps-91-to-1588-crore-misses-estimates/articleshow/97698481.cms">Bharti Airtel Q3 net profit jumps 91% to ₹1,588 crore, misses estimates</a>

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After delivering 25 bps hike in repo rate, RBI to change its stance on April 6, say economists

IANS

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

ANI

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

BI India Bureau

RBI approves Rs 87,416 cr dividend payout to the government for 2022-23

Agencies

Hopefully, this is last rate hike by RBI in current cycle: Industry, experts

PTI

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