The <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (<keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>) on Friday said it will conduct on-tap targeted long-term repo operations (TLTRO) for an amount of Rs 1 lakh crore to ensure comfortable liquidity conditions in the system. "It has been decided to conduct on-tap TLTRO with tenors of up to three years for a total amount of up to Rs 1,00,000 crore at a floating rate linked to the policy repo rate," <keyword id="64190" type="POSITION" weightage="20" keywordseo="RBI-Governor">RBI Governor</keyword> <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> said while announcing the decisions taken by the central bank's Monetary Policy Committee (MPC). Liquidity availed by banks under the scheme has to be deployed in corporate bonds, commercial papers, and non-convertible debentures issued by entities in specific sectors over and above the outstanding level of their investments in such instruments as on September 30, 2020, RBI said. The scheme will be available up to March 31, 2021, with flexibility with regard to enhancement of the amount and period after a review of the response to the scheme. In its bi-monthly monetary policy review, RBI kept the policy rate unchanged at 4 per cent and decided to continue with the accommodative stance. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/rbis-mpc-keeps-the-policy-rates-unchanged-to-maintain-accommodative-stance-for-inflation/articleshow/78566955.cms">RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged</a> <a href="https://www.businessinsider.in/business/corporates/news/tcs-beats-accenture-to-become-the-worlds-most-valuable-it-services-company/articleshow/78566487.cms">TCS beats Accenture to become the world’s most valuable IT services company — but this not the first time it has raced ahead</a> <a href="https://www.businessinsider.in/india/news/union-minister-ram-vilas-paswan-dies-at-74/articleshow/78558640.cms">India's consumer affairs minister Ram Vilas Paswan passes way at 74</a> <a href="https://www.businessinsider.in/science/space/news/mars-will-appear-bigger-redder-and-brighter-on-october-13-and-wont-get-this-close-to-earth-again-until-2035/articleshow/78556539.cms">Mars will appear bigger, redder, and brighter on October 13 — and won’t get this close to Earth again until 2035</a>

RBI to conduct on-tap TLTRO worth ₹1 lakh crore

<ul><li>The Reserve Bank of India (RBI) Governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> was doling out optimism to the market at today’s Monetary Policy Committee (<keyword id="6369693" type="UNKNOWN" weightage="20" keywordseo="MPC">MPC</keyword>) briefing. </li><li>The MPC will be expanding the limit of open market operations (OMOs), providing on-tap TLTRO of ₹1 lakh crore, and introducing State Development Loan (SDL) OMOs.</li><li>While these measures may ease some tensions in the short run, the markets still seek predictability and interest rate cuts. </li><li>Das said that both the apex bank and markets can operate in the same space in competition without necessarily being combative. </li></ul>The Reserve Bank of India (RBI) Governor Shaktikanta Das delivered a <a href="https://www.businessinsider.in/policy/economy/news/rbis-mpc-keeps-the-policy-rates-unchanged-to-maintain-accommodative-stance-for-inflation/articleshow/78566955.cms">chipper note</a> on India’s recovery today. According to him, even though there’s some disconnect between the RBI and the markets, all will be well — soon. However, what the market participants want is for the RBI to acknowledge that the economy is in deep trouble and, therefore, cut interest rates further, boost money supply, and ease credit. <div type="Article" hostid="261" msid="78566955" title="RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged" mstype="2" mssubtype="0"></div> The deep contraction of economic growth witnessed in the first quarter is behind us, he said, while emphasising that some silver linings are already visible. However, not all that glitters is gold. “We remain circumspect about generalising these early greenshoots, as they have benefitted from base effects and one-off shifts in some sectors,” said ratings agency ICRA. Despite Governor Das’ attempt to ease those tense nerves in the market, the argument seems far from over. “The <keyword id="64190" type="POSITION" weightage="20" keywordseo="RBI-Governor">RBI governor</keyword>'s push for optimism is bordering on the edge of hope,” said Sushil Kedia, the founder of KEDIANOMICS. “What's going to happen over the next one month or three is anybody’s guess.” <div type="image" title="India gdp by quarter" msid="78574635" hostid="261" caption="&amp;lt;p&amp;gt;India&amp;#39;s GDP numbers over the last two years and RBI&amp;#39;s expectations for the second half of the fiscal year&amp;lt;/p&amp;gt;"></div> The question to ask here is not who is right and who is wrong, but what happens if any one of them is wrong. If the markets are wrong and the economy recovers by March 2021, they will be in for a surprise. However, if the RBI is wrong and the economy is worse off than the picture painted by the Governor, the implication may be more dire for everyone in the country. Not just growth, RBI hopes the inflation wave will also ebb on its own “MPC has decided to look through the current inflation as a transient hump,” Governor Das explained, adding that inflation will ease between January and March next year. However, Kedia is less sanguine than the RBI Governor. “The interest rate cycle has been so overstretched and soft for so long, that I do see signals in long term data analysis, that at any point far sooner than one would expect, some global events will start reversal of the interest rate cycle,” he said. <div type="image" title="INflation india (1)" msid="78574672" hostid="261" caption="&amp;lt;p&amp;gt;Inflation in India since the outbreak of the coronavirus pandemic in the country&amp;lt;/p&amp;gt;"></div> “The relative economic growth differential between China and the rest of the world is almost 13-14%,” he added. The point Kedia is making is that if inflation rises in the rest of the world, even India will have to raise interest rates to tackle the prices, and the RBI is not preparing for it. While not the most obvious possibility, only time will tell if Kedia’s fear is proven right. RBI’s efforts have been lauded but in parts While the RBI has opened the liquidity taps time and again, a big concern in the market is that both central and state governments need to borrow more and more to meet the rising expenses due to the pandemic. The RBI said that it would buy long-term bonds — issued by both states and the centre — on tap worth ₹20,000 crore, up to ₹1 lakh crore in the coming days. <div type="image" title="india govt debt" msid="78574919" hostid="261" caption="&amp;lt;p&amp;gt;Indian government owes lenders more than &amp;#8377;101 trillion&amp;lt;/p&amp;gt;"></div> That would provide the money states need, but it will also mop up the funds that would have otherwise been available for private borrowers. In these challenging times, it is believed that lenders would rather give money to a government than risky private parties. And that would mean that the borrowing rates for private companies will remain higher than what it should have been. “It also remains to be seen if the commitment to facilitate state and central government borrowing, as well as the explicit signals aimed at softening yields, are adequate for bond markets to shrug off concerns regarding the fiscal health of the central and state governments,” ICRA pointed out. Back to the demand for another rate cut Essentially, private borrowers are back to seeking interest rate cuts, which the RBI seems reluctant to execute at this point. “These (measures announced today) should be beneficial for banks who are comfortable with the credits of corporates to lend as banks' borrowing rates are fixed. In case the repo rates are cut again, banks can refinance at lower rates also,” said Murthy Nagarajan, the head of fixed income at Tata Mutual Fund. <div type="image" title="Copy of TCS share price 2" msid="78575065" hostid="261" caption="&amp;lt;p&amp;gt;Nifty 50 closes above 11,900 points after RBI&amp;#39;s announcement today&amp;lt;/p&amp;gt;"></div> Instead of directly cutting rates, the RBI has offered up open market operations (OMOs), which — according to Abhishek Goenka, the founder and CEO of India Forex Advisors (IFA) — will help bring borrowing rates down in the commercial paper market. OMOs are conducted by the central bank to give or take currency from a bank or group of banks by buying or selling government bonds on the open market. It’s an instrument banks can use to increase or shrink liquidity in the market. “RBI was doing OMOs on an ad hoc basis,” explained Goenka, essentially saying that while RBI may be taking necessary steps, they haven’t been very predictable. And markets hate surprises. <div type="image" title="Copy of nifty50" msid="78575238" hostid="261" caption="&amp;lt;p&amp;gt;India&amp;#39;s 10-year bond yeilds over the last one month&amp;lt;/p&amp;gt;"></div> Until September 30, it wasn’t clear how cash-strapped state governments would find the money to meet the additional expenses in the wake of the pandemic. The markets are glad that RBI has opened up the emergency borrowing window — called ways and means advances or WMA — <a href="https://www.businessinsider.in/policy/economy/news/india-leaves-borrowing-calendar-unchanged-target-remains-at-12-lakh-crore/articleshow/78407506.cms">until the end of the fiscal year by 60%</a>. WMA essentially means that governments can borrow directly from the RBI to meet their emergency needs. That leaves more money in the market for private borrowers. While the decision came just in time, there was enough fear and chaos in the run-up to it. What the markets want are predictability and interest rate cuts. Meanwhile, the Governor has asked the market to keep the faith. “We look forward to cooperative solutions for the borrowing program for the second half of the year… These views can be competitive without being combative,” he said. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/rbis-mpc-keeps-the-policy-rates-unchanged-to-maintain-accommodative-stance-for-inflation/articleshow/78566955.cms">RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged</a> <a href="https://www.businessinsider.in/business/corporates/news/tcs-beats-accenture-to-become-the-worlds-most-valuable-it-services-company/articleshow/78566487.cms">TCS beats Accenture to become the world’s most valuable IT services company — but this not the first time it has raced ahead</a> <a href="https://www.businessinsider.in/india/news/union-minister-ram-vilas-paswan-dies-at-74/articleshow/78558640.cms">India's consumer affairs minister Ram Vilas Paswan passes way at 74</a> <a href="https://www.businessinsider.in/science/space/news/mars-will-appear-bigger-redder-and-brighter-on-october-13-and-wont-get-this-close-to-earth-again-until-2035/articleshow/78556539.cms">Mars will appear bigger, redder, and brighter on October 13 — and won’t get this close to Earth again until 2035</a>

RBI Governor wants markets to keep the faith but traders want something more

<ul><li>The <keyword id="6375120" type="ORGANIZATION" weightage="20" keywordseo="monetary-policy-committee">Monetary Policy Committee</keyword> (<keyword id="6369693" type="UNKNOWN" weightage="20" keywordseo="MPC">MPC</keyword>) leaves the repo and <keyword id="6403556" type="UNKNOWN" weightage="20" keywordseo="reverse-repo-rate">reverse repo rate</keyword> unchanged at 4% and 3.35%, respectively. </li><li>RBI expects inflation to ease closer to the target between January and March next year.</li><li>For the entire year, the MPC has pegged the real GDP to show a decline of 9.5%.</li></ul>The <keyword id="6357126" type="DEFINITION" weightage="20" keywordseo="Monetary-Policy">Monetary Policy</keyword> Committee (MPC) has left the repo and reverse <keyword id="43352" type="PERSON" weightage="20" keywordseo="Repo-rate">repo rate</keyword> unchanged at 4% and 3.35%, respectively. While the current high inflation level may have influenced this decision, Governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> said that the recent price rise, particularly food inflation doesn’t worry the panel as much. “MPC has decided to look through the current inflation as a transient hump,” Governor Das explained, adding that inflation will ease between January and March next year. <div type="image" title="CPI" msid="78567726" hostid="261" caption="&amp;lt;p&amp;gt;Consumer price inflation over the last three months&amp;lt;/p&amp;gt;"></div> The MPC has an inflation band of plus or minus 4% to keep a watch on. However, over the past five months, retail inflation has remained above the 6% ‘comfort band’. While inflation is expected to remain above 6% in September as well, it's likely to start coming down there after as supply chains open up. "Supply chain disruptions and margins and mark ups are the major factors driving up inflation," said Das. As inflation eases, the MPC also expects GDP growth to break out of contraction and turn around. For the entire year, the MPC pegged the real GDP decline at 9.5%. The forecast is at par with the World Bank’s expectations, which slated India’s GDP to dip by 9.6% by the end of the current fiscal. This is the second consecutive MPC meeting where they have not touched policy rates. However, since 2019, the MPC has cut rates by 250 basis points (bps). One hundred basis points make 1%. India’s path to recovery “In my view, it is likely to be a three-speed recovery with individual sectors showing varying paces, depending on specific realities,” said Das. According to him, the agricultural and allied sectors will lead India’s recovery, followed by two-wheelers, passenger vehicles and tractors, drugs and pharmaceuticals. Manufacturing’s capacity utilisation is expected to recover in the next three months and gain traction. The second set of sectors to recover are those affected more severely by social distancing and are contact-intensive. “RBI’s status quo on rates was along expected lines, given the elevated inflation. But the MPC clearly delivered accommodative moves through non-interest rate tools,” said Amar Ambani, the senior President and head of research for institutional equities at YES Securities. The central bank announced to expand weekly open-market-operations (OMO) purchases to ₹25,000 crore and TLTRO of ₹1 lakh crore. State Development Loans will also now be a part of its purchases. “We see a possibility of further scope of 25-50 basis points cut in repo policy rates,” said Ambani. This was the MPC first meeting with three external members recommended by the government — Ashima Goyal, who is a member of Prime Minister’s Economic Advisory Council (PMEAC); Shashanka Bhide, a senior advisor at National Council for Applied Economic Research and Jayanth Verma, who is a professor at the Indian Institute of Management, Ahmedabad (IIM-A). SEE ALSO: <a href="https://www.businessinsider.in/business/corporates/news/tcs-beats-accenture-to-become-the-worlds-most-valuable-it-services-company/articleshow/78566487.cms">TCS beats Accenture to become the world’s most valuable IT services company — but this not the first time it has raced ahead</a> <a href="https://www.businessinsider.in/india/news/union-minister-ram-vilas-paswan-dies-at-74/articleshow/78558640.cms">India's consumer affairs minister Ram Vilas Paswan passes way at 74</a> <a href="https://www.businessinsider.in/science/space/news/mars-will-appear-bigger-redder-and-brighter-on-october-13-and-wont-get-this-close-to-earth-again-until-2035/articleshow/78556539.cms">Mars will appear bigger, redder, and brighter on October 13 — and won’t get this close to Earth again until 2035</a>

RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged

<ul><li>With an increase in <keyword id="6354680" type="General" weightage="20" keywordseo="credit" source="Orion">credit</keyword> offtake, the <keyword id="568129" type="General" weightage="20" keywordseo="credit-deposit-ratio" source="Orion">credit deposit ratio</keyword> reached almost 75.04% as of April 7, 2023. </li><li>In April, the banking system's liquidity changed from a deficit to a surplus due to government spending and the Reserve Bank of India's (RBI) foreign exchange intervention.</li><li>In the current environment of rising interest rates, the median 1-year MCLR for Scheduled Commercial Banks increased from 8.55% in March 2023 to 8.6% in April 2023.</li></ul>In March 2023, both lending and deposit rates rose, but the rate of increase was faster for the deposit rates than lending rates. Moreover, the rates for fresh business (new loan taken by a borrower) have increased at a faster clip when compared to rates for outstanding business (old loan that is yet to be repaid). March also witnessed a surge in <keyword id="632526" type="General" weightage="20" keywordseo="credit-demand" source="Orion">credit demand</keyword> due to growth seen in personal loans, working capital loans, and the participation of non-banking financial companies (NBFCs) resulting in double-digit growth, according to a BFSI Research report by credit rating agency CareEdge. <cmsannotation type="cmsannotation" annotationid="Credit deposit ratio reaches almost 75.04% on April 7" comment="subhead" text="Credit deposit ratio reaches almost 75.04% on April 7"><keyword id="5173780" type="General" weightage="20" keywordseo="credit-deposit" source="Orion">Credit deposit</keyword> ratio reaches almost 75.04% on April 7</cmsannotation> However, the mobilisation of deposits has been relatively low, and the credit offtake has increased, causing the credit deposit ratio to reach almost 75.04% as on April 7, 2023. At the beginning of FY23, the banking system had a surplus of ₹6.3 lakh crore in liquidity. However, it has reduced over time and eventually turned into a deficit towards the end of FY23. Hence liquidity had been injected into the system. In April, the banking system's liquidity changed from a deficit to a surplus due to government spending and the Reserve Bank of India's foreign exchange intervention. However, the liquidity infusion was somewhat offset by the redemption of long-term repo operation (LTRO) and targeted long-term repo operation (TLTRO). LTRO and TLTRO are monetary policy tools used by the RBI to inject liquidity into the banking system. <cmsannotation type="cmsannotation" annotationid="Weighted average call rate rises to 6.52% as on April 21" comment="subhead" text="Weighted average call rate rises to 6.52% as on April 21">Weighted average call rate rises to 6.52% as on April 21</cmsannotation> To maintain liquidity at a neutral level, the RBI may continue to conduct variable rate reverse repo (VRRR) auctions – a tool used by the RBI to manage liquidity in the banking system. There has been an increase in the short-term weighted average call rate (WACR) from 3.53% as of April 22, 2022, to 6.52% as of April 21, 2023. This rise in WACR can be attributed to a combination of higher policy rates and a reduction in liquidity within the system. The WACR is an indicator of the overall liquidity conditions in the banking system. <cmsannotation type="cmsannotation" annotationid="Lending rates on the rise" comment="subhead" text="Lending rates on the rise">Lending rates on the rise</cmsannotation> The weighted average lending rate (WALR) – which is the weighted average of all the interest rates that a bank charges on its outstanding loans – on fresh loans has continued to increase month-over-month (M-o-M). For public sector banks (PSBs) it’s up by 11 basis points (bps), for private sector banks (PVBs) by 21 bps, and for scheduled commercial banks (SCBs) by 8 bps. The lending rates on fresh loans for PSBs, PVBs, and SCBs have surpassed their levels in March 2020. In addition, the WALR on outstanding loans has also increased M-o-M across all segments – for PSBs by 7 bps, for PVBs by 4 bps, and for SCBs by 5 bps. Interestingly, foreign banks have experienced a decrease in their lending rates. The spread between the WALR on outstanding loans and WALR on fresh loans for PSBs and PVBs has continued to narrow M-o-M due to a higher increase in WALR on fresh loans than on outstanding loans. In the current environment of rising interest rates, the median 1-year MCLR (marginal cost of funds-based lending rate) for SCBs increased from 8.55% in March 2023 to 8.60% in April 2023. Despite the Monetary Policy Committee (MPC) taking a pause from rate increase at its last meeting, banks have continued to raise rates. This has had a faster impact on the lending rate of new loans, while older loans are re-priced based on specific repricing dates. As a result, the spread between the WALR for outstanding loans and the WALR for new loans is expected to narrow in the short term and stabilise in the medium term.

You Searched For "mpc tltro" and got 4 results

RBI to conduct on-tap TLTRO worth ₹1 lakh crore

PTI

RBI Governor wants markets to keep the faith but traders want something more

Prabhjote Gill

RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged

Prabhjote Gill

Deposit rates rise faster than lending rates in March 2023: CareEdge

Anagh Pal