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

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

The Indian central bank’s rate-setting panel, the Monetary Policy Committee (MPC), has kept the <keyword id="2177983" type="General" weightage="20" keywordseo="repo-rate-unchanged" source="Orion">repo rate unchanged</keyword> at 6.5%, <keyword id="6359111" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="Orion">Shaktikanta Das</keyword>, governor of the Reserve Bank of India (<keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>), confirmed on Friday. The decision was taken in a majority 4:2 vote by the six-member MPC, headed by <keyword id="7268643" type="General" weightage="20" keywordseo="rbi-governor-shaktikanta-das" source="Orion">RBI Governor Shaktikanta Das</keyword>. This meeting followed closely on the heels of Lok Sabha 2024 election results and a renewed but less robust mandate for the NDA government, spearheaded by Prime Minister Narendra Modi. This marks the eighth consecutive instance where the central bank has maintained the status quo on the benchmark <keyword id="43352" type="General" weightage="100" keywordseo="repo-rate" source="Orion">repo rate</keyword>. It had last increased the repo rate to 6.5 percent back in February 2023. For context, the repo rate is the interest rate at which the RBI lends to banks. When the repo rate is cut, it makes borrowing cheaper for banks, which in turn leads to lower loan rates and consequently, reduced EMIs. "As expected, the MPC has decided to keep the repo rate unchanged at 6.5%. This decision aligns with the MPC's calibrated measures to tackle persistent inflation. The RBI has successfully maintained the resilience of the Indian economy, contributing to sustained growth momentum even amidst a challenging global environment," said Mr Ashwin Chadha, CEO of India Sotheby's International Realty. "The good news is that CPI inflation continues to soften, and the GDP growth rate is projected to remain above 7% for all quarters of FY2024-25. Additionally, the monsoon is expected to be favorable, reducing potential risks to the economy." Governor Das, in his post-policy press conference, also underscored the need for a balanced approach in handling monetary policy. He highlighted the MPC's strategy of gradually scaling back accommodation to ensure that inflation meets the targeted range, while still fostering economic growth. “Monetary policy must continue to remain disinflationary and be resolute in its commitment to aligning inflation to the target of 4 per cent on a durable basis to sustain price stability and outset strong foundation,” the <keyword id="64190" type="General" weightage="20" keywordseo="rbi-governor" source="Orion">RBI Governor</keyword> stated. The RBI has also updated its growth forecasts for the 2024-25 financial year, predicting a GDP growth rate of 7.2%. The projections for each quarter are 7.3% for Q1, 7.2% for Q2, 7.3% for Q3, and 7.2% for Q4. Governor Das pointed out that the risks to this growth outlook are evenly distributed. By maintaining the repo rate at its current level, the RBI signals its cautious stance on balancing the dual objectives of inflation control and economic recovery support. This decision comes at a crucial time, as the global economy contends with uncertainties from geopolitical conflicts and the ongoing impacts of the COVID-19 pandemic. (With inputs from ANI)

Monetary Policy Committee keeps repo rate unchanged at 6.5%, confirms RBI governor Shaktikanta Das

New Delhi [<keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword>], February 5 (ANI): The Monetary Policy Committee of the Reserve Bank of India (<keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword>) in its February review meeting is expected to again put a pause on the repo rate, according to <keyword id="20112035" type="General" weightage="20" keywordseo="sbi-research" source="keywords">SBI Research</keyword>. In its December meeting, the RBI unanimously decided to keep the policy repo rate unchanged at 6.5 per cent, thus maintaining the status quo for the fifth straight time. The repo rate is the rate of interest at which RBI lends to other banks. "We expect the RBI to continue pause stance in upcoming policy. Strong US non-farm payroll data and wages seem to have pushed back on market expectations for a quick pivot to rate cuts," said the research report Ecowrap as a prelude before the three-day RBI meeting that starts Tuesday. The reports said that the first repo rate rate cut could be on the table from June 2024. "Aug'24 looks the best bet now...," it said. The RBI typically conducts six bimonthly meetings in a financial year, where it deliberates interest rates, money supply, inflation outlook, and various macroeconomic indicators. A relative decline in inflation, barring the latest spike, and its potential for further decline may have prompted the central bank to put the brake on the key interest rate. Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well. Barring the latest pauses, the RBI raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. The retail inflation in India though is in RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario. In December, it was 5.69 per cent. The <keyword id="19901377" type="General" weightage="20" keywordseo="us-federal-reserve" source="keywords">US Federal Reserve</keyword> in its January meeting voted to leave the key interest rate unchanged at 5.25-5.50 per cent, keeping the policy rate unchanged for the fourth straight time on a trot. The US monetary policy committee in its statement said that the recent indicators suggested that economic activity has been expanding at a solid pace. <keyword id="19951097" type="General" weightage="20" keywordseo="us-fed" source="keywords">US Fed</keyword> had raised interest rates from near zero to now 5.25-5.50 per cent in the fight against inflation, post-COVID. US inflation in December was 3.4 per cent. US Federal Reserve's commitment has been to bring down consumer inflation to its target of 2 per cent. (ANI)

Expect RBI to again pause repo rate in February policy meeting: SBI Research

<ul><li>Corporate loan growth originations grew in lower single digits in FY23.</li><li>Investment announcements in 2023 were at their lowest since 2018, excluding 2020.</li><li>Auto, home and other consumption loans saw sharp growth, led by <keyword id="20026653" type="General" weightage="20" keywordseo="personal" source="keywords">personal</keyword> loans. </li></ul>Large corporates are still not driving India’s credit growth as private capital expenditure is yet to pick up pace. While consumption, MSME and microfinance loans’ originations volume grew in double digits between FY22 and FY23, corporate loan growth was at a mere 2.4%, as per <keyword id="19994500" type="General" weightage="20" keywordseo="crif" source="keywords">CRIF</keyword> High Mark’s report on ‘How India Lends’. Investments by companies have remained in the slow lane even in FY24, according to a report by <keyword id="19920717" type="General" weightage="20" keywordseo="bank-of-baroda" source="keywords">Bank of Baroda</keyword>. In the first three quarters of FY24, investments to the tune of ₹10.80 lakh crore were announced. Most of these announcements were dominated by airlines, power, chemicals and machinery. Bank of Baroda in a report said that 2023’s investment announcements, most of which might not materialize, are at the lowest since 2018. That however excludes 2020, when Covid-19 induced lockdown was in-effect. “Data on new investment announcements do indicate that industry in general is still in a wait and watch mode. One factor holding back investment could be excess capacity in several sectors. <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> data for June shows the average at 73.6%,” said economists at Bank of Baroda. Apart from this, uncertainty due to the elections could have played a role in companies being tight fisted. “The third factor could be high interest rates and the expectation of repo rate cuts next year in the second quarter of the fiscal,” the economists added. The consumption loan boom On the other hand, consumption loans that include home loans, auto loans, personal loans etc, grew the fastest at 37.7% in FY23. Within consumption, personal loans saw the sharpes growth, followed by consumer durable loans. Public and private sector banks give a large chunk of home loans. “There is a 22% increase in average ticket size (ATS) from ₹20.2 lakh in FY20 to ₹24.7 lakh in FY23. There has been a shift in originations by both value and volume seen from ticket size ₹5-35 lakh to ₹35-75 lakh,” said CRIF. Housing finance companies and PSU banks lead ticket size bands under ₹75L, while private banks lead the over ₹75 lakh ticket size loan market. Loan origination growth (FY22 to FY23) <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Consumption Loan Type </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Portfolio size </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Origination value growth </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Origination volume growth </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Home Loans </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹30.7 lakh crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">18.1% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">13.1% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Personal Loans </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹10.9 lakh crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">35.2% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">50.7% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Two-Wheeler Loans </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹1.1 lakh crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">50.3% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">35.3% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Auto Loans </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹5.9 lakh crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">37.6% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">21.1% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Consumer Durable Loans </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹0.5 lakh crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">32.8% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">37.5% </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>Source: CRIF *Portfolio as of June 2023 Fintechs lead personal loan growth Personal loans are dominated by public sector banks and private banks by value; and NBFCs by volume. Loan originations grew twice over in both value and volume from FY20 to FY23. “Fintechs lead the growth in small ticket and small tenor loans. Their share in originations volume for ticket size under-₹25,000 loans went up to 75% in FY23 from 67% in FY20,” said CRIF. MSME and microfinance loan originations volume grew 20.8% and 16.6% respectively, as per the CRIF report. "MSME lending experienced substantial percentage growth in originations by value, with the micro segment being the largest contributor. These trends, combined with an encouraging improvement in delinquencies, thus, reflect the resilience of the Indian economy,” said <keyword id="20372020" type="General" weightage="20" keywordseo="sanjeet-dawar" source="keywords">Sanjeet Dawar</keyword>, MD of CRIF High Mark.

India’s corporates in ‘wait and watch’ mode as consumption loans zoom

<ul><li>High vegetable inflation, driven by hardening onion prices, has kept food inflation at 8.66% in February.</li><li>With low reservoir levels in many states, food inflation in FY25 is expected to be driven by monsoons, say experts.</li><li>The RBI is focused on bringing inflation below 4% and might continue the status quo for a longer time now, believe experts. </li></ul>In February, retail inflation came in on expected lines at 5.09%. However, high vegetable inflation, driven by hardening onion prices has kept food inflation up at 8.66%. Experts now believe that the <keyword id="19899810" type="General" weightage="20" keywordseo="reserve-bank-of-india" source="keywords">Reserve Bank of India</keyword> (RBI) which has been focussed on bringing inflation to 4%, will maintain the status quo in the upcoming credit policy. “We expect inflation to average 4.8% in FY25. Given that the RBI Governor has been highlighting the aim of getting inflation to 4% on a durable basis, the policy rates are likely to be kept on hold in the upcoming policy meeting, with no change in stance,” said <keyword id="20938330" type="General" weightage="20" keywordseo="rajni-sinha" source="keywords">Rajni Sinha</keyword>, chief economist, CareEdge Ratings. Regulator to continue cautious stance Despite expectations from the market, the RBI has maintained its ‘withdrawal of accommodation’ stance in the last policy meeting in February. This policy, aiming to curtail inflation further, entails a reduction of easy money supply in the system, which started during the initial COVID-19 phase. RBI governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword> had also earlier spoken about the risk of food inflation spilling into broader inflation. “We retain our view that RBI will remain cautious on volatile food inflation trajectory and hence prefer to remain in pause mode on rates till August policy. However, with RBI already having continuously fine-tuning liquidity and easing overnight rates closer to the repo rate, we see room for a shift in stance in the June policy,” said <keyword id="20169699" type="General" weightage="20" keywordseo="upasna-bhardwaj" source="keywords">Upasna Bhardwaj</keyword>, chief economist at <keyword id="19938495" type="General" weightage="20" keywordseo="kotak-mahindra-bank" source="keywords">Kotak Mahindra Bank</keyword>. Agrees Akhil Mittal, Senior Fund Manager-Fixed Income, <keyword id="20929846" type="General" weightage="20" keywordseo="tata-asset-management" source="keywords">Tata Asset Management</keyword>, “We anticipate the regulator to maintain a cautious stance. We think RBI would rather continue with stability priority and continue maintaining the 4% inflation target as sacrosanct, and hence we do not see a premature easing from RBI.” Vegetable inflation zooms, pulses in a tough zone Vegetable inflation came in high at 30.3% in February, and experts believe that pricey onions will keep food inflation elevated. Inflation in pulses, spices and eggs also saw double-digit inflation. Edible oils and fats have brought down inflation to an extent with negative growth. The food basket has nearly 50% weightage in the consumer price inflation (CPI) data. “Inflation is purely a food inflation-driven phenomenon which will continue to pressurise inflation in the coming months. Besides, horticulture output this year is expected to be lower than last year. Cereals, eggs, sugar, spices and pulses are the other pain points here,” comments <keyword id="20102121" type="General" weightage="20" keywordseo="madan-sabnavis" source="keywords">Madan Sabnavis</keyword>, chief economist at Bank of Baroda. The outlook for food prices is also bleak with lower reservoir levels and their impact on agricultural output. “The ongoing high inflation in specific food categories, including cereals, pulses, spices, and vegetables pose a risk of potentially broadening price pressures and de-anchoring inflationary expectations. Reservoir levels, particularly in eastern and southern India, persist at lower levels. Consequently, the forthcoming monsoon in FY25 holds significant importance for the trajectory of food inflation,” said Sinha. Core inflation has however remained soft, staying below the 4% threshold for three consecutive months. Rural inflation came in higher at 5.3%, while urban inflation is at 4.8% — mostly due to higher weightage of food products in the former index. Twelve of India’s 22 states saw inflation of above 5.1%. Odisha had the highest at 7.6%, while Delhi saw the lowest at 5.3%.

RBI likely to maintain status quo after food inflation keeps Feb print high, say experts

Realtors' apex body <keyword id="6393312" type="General" weightage="80" keywordseo="credai" source="Orion">Credai</keyword> on Thursday requested the <keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> not to increase the repo rate in the upcoming monetary policy as this would raise the borrowing cost of builders and customers, impacting housing sales. With retail inflation remaining above the comfort level of 6 per cent and most global peers, including the <keyword id="117388" type="General" weightage="50" keywordseo="us-fed" source="Orion">US Fed</keyword>, continuing their hawkish stance, industry experts feel the Reserve Bank of India may go in for a 25 basis points hike in the bi-monthly monetary policy to be announced on April 6. Confederation of Real Estate Developers' Association of India (Credai), having more than 13,000 developers as members, has "urged the RBI to not to increase the repo rate any further, citing the financial challenges faced by developers and the potential impact on housing sales due to the consequential rise in prices and home loan rates". In the last one year, the body said, the repo rate has increased from 4 to 6.5 per cent and another hike would lead to even higher borrowing costs for developers. Credai National President Harsh Vardhan Patodia said, "In the last 1 year, the cost of construction has risen rapidly due to the gradual increase in repo rates by the RBI, which has adversely impacted many developers as they struggle to cope financially. Another repo rate hike would not only make certain projects financially unfeasible, but it would also deter homebuyers as home loan rates will be at an all-time high". The association said housing prices rose by 5-6 per cent in the last one year and any hike in the repo rate would lead to even higher project costs and housing prices. It argued that the profit margins of builders would reduce. Interest rates on home loans would touch almost double-digit home loan rates, deterring customers from purchasing properties, especially in tier 1 cities, Credai said. "This could lead to a slowdown in the real estate market and result in homebuyers postponing their purchase plans, reversing a trend in the post-CODVID era wherein homebuying was on the rise," it cautioned. Property consultants and developers also feel that sales could be hit in case of a further rise in mortgage rates. Housing.com CEO Dhruv <keyword id="274894" type="General" weightage="80" keywordseo="agarwala" source="Orion">Agarwala</keyword> said the RBI would probably stick to a moderate increase in its benchmark lending rate in the upcoming policy announcement, before hitting a pause button on hikes later in 2023. "The move is likely to have limited impact on real estate demand as home purchase decisions are driven and determined by several factors other than just home loan rates. That said, borrowers would feel the pinch of this increase in rates as home loan EMIs for existing and new loans would go up," Agarwala added. Realty firm Signature Global Chairman Pradeep Aggarwal said any further increase in policy rates could push the home loan interest rate beyond the psychological barrier of 10 per cent, "which could have a substantial impact on buyer sentiments and affordability". <keyword id="12503468" type="General" weightage="50" keywordseo="vimal-nadar" source="Orion">Vimal Nadar</keyword>, Head of Research at Colliers India, said home loan interest rates are already at an alarmingly higher level of 9.5 per cent and above. "With homebuyers already stretched on EMIs and loan tenures, a further hike in interest rate will hit them hard. The impact will be compounded in the current environment where the industry expects a lesser increase in income levels with housing prices remaining firm," Nadar said. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/small-stocks-lag-behind-in-fy23-take-bigger-hit-than-bluechip-firms/articleshow/99117250.cms">Small stocks lag behind in FY23; take bigger hit than bluechip firms</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/tamil-nadu-says-nahi-to-dahi-over-hindi-name-on-curd-packets/articleshow/99116854.cms">Tamil Nadu says 'nahi to dahi' over Hindi name on curd packets</a>

Repo rate hike will slow down real estate, reverse post-Covid trends, says industry body to RBI

New Delhi, <keyword id="50847" type="General" weightage="80" keywordseo="reserve-bank" source="Orion">Reserve Bank</keyword> Governor <keyword id="6359111" type="General" weightage="50" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> on Tuesday said the central bank is firmly focused on bringing down inflation to 4 per cent and remains prepared to undertake policy responses to deal with supply shocks, which have become more frequent with profound implications. The current episode of high global inflation and preceding overlapping shocks of the pandemic and Russia-Ukraine war have raised significant issues and challenges for the conduct of monetary policy, the governor said in a speech on 'Art of Monetary Policy Making: The Indian Context' at <keyword id="3658227" type="General" weightage="50" keywordseo="delhi-school-of-economics" source="Orion">Delhi School of Economics</keyword> (DSE) <keyword id="18666750" type="General" weightage="50" keywordseo="diamond-jubilee-distinguished-lecture" source="Orion">Diamond Jubilee Distinguished Lecture</keyword>. He said the monetary policy framework in India has evolved in line with the developments in theory and country practices, the changing nature of the economy and developments in financial markets. Within the broad objectives, the relative emphasis on inflation, growth and financial stability has, however, varied across monetary policy regimes since independence. Das listed out steps the central bank took to deal with the situation created in the wake of the COVID pandemic and the Russia-Ukraine war. Following the outbreak of the war, the central bank raised the policy rates by 250 basis points since May 2022. "After a near-zero policy rate for a prolonged period, central banks in these (advanced) economies started raising interest rates aggressively in 2022, which contributed to stress in certain banks in these economies. In contrast, our battle against inflation is not constrained by financial stability concerns. In fact, even during the COVID phase, we continuously took measures to strengthen financial stability," the governor said. The Reserve Bank, he said, has adopted a prudent approach and taken several initiatives to revamp the regulation and supervision of banks, NBFCs and other financial entities by developing an integrated and harmonised architecture. "Our banking system remains resilient and healthy with improved capital ratios, asset quality and profitability," he said. Das said the <keyword id="30067" type="General" weightage="50" keywordseo="rbi" source="Orion">RBI</keyword>'s experience in recent years shows that supply shocks have become more frequent with profound implications for inflation management and anchoring of inflation expectations. A key risk of sustained high inflation is that it can de-anchor inflation expectations. "It is, therefore, important to remain vigilant and take necessary steps in a calibrated and timely manner to keep expectations firmly anchored. "The Reserve Bank has been quick and calibrated while navigating through such turbulences. We look through fleeting shocks but remain prepared to undertake policy responses if such shocks show signs of persistence and getting generalised," he said. In such a scenario, monetary policy has to focus on containing the second-round effects, the governor added. "We will remain watchful of this also. The role of continued and timely supply-side interventions, as being undertaken by the government, assumes criticality in limiting the severity and duration of such food price shocks. "In these circumstances, it is necessary to be watchful of any risk to price stability and act timely and appropriately. We remain firmly focused on aligning inflation to the target of 4.0 per cent," he added. Headline inflation based on the Consumer Price Index (CPI) had eased to 4.8 per cent in June 2023 from the peak of 7.8 per cent in April 2022. It, however, surged to 7.4 per cent in July, mainly on account of a spurt in vegetable prices, which have already started moderating. Das noted that low and stable inflation helps households and businesses in planning for long-term savings and investments, which ultimately drive innovation, productivity and sustainable growth. On the contrary, high and volatile inflation corrodes the economy by denting productivity and the long-term growth potential, he said, adding inflation also imposes a disproportionate burden on the poor. The Reserve Bank has been mandated to maintain price stability, keeping in mind the objective of growth. Price stability has been numerically defined as maintaining a headline CPI inflation target of 4.0 per cent with a tolerance band of +/- 2 per cent. The tolerance band provides flexibility to accommodate growth and financial stability concerns, supply shocks and measurement and forecast errors, Das said. The target is set by the government in consultation with the Reserve Bank for 5 years.

RBI firmly focused to bring down inflation to 4%: Shaktikanta Das

<ul><li>For the fourteenth straight month, the services sector witnessed an expansion in output.</li><li>The upturn was reportedly restricted by price pressures, an increasingly competitive environment and unfavourable public policies. </li><li>Employment rose at a slower rate than in August, the survey said.</li></ul> The <keyword id="3658" type="General" weightage="80" keywordseo="india" source="Orion">India</keyword>n services sector activity fell to a six-month low in September, as new business inflows rose at the slowest rates since March, amid inflationary pressures and competitive conditions, a monthly survey said. The seasonally adjusted S&amp;P Global India Services <keyword id="104215" type="General" weightage="100" keywordseo="pmi" source="Orion">PMI</keyword> Business Activity Index fell to 54.3 in September, from 57.2 in August, highlighting the weakest rate of expansion since March. For the fourteenth straight month, the services sector witnessed an expansion in output. In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction. "The Indian service sector has overcome many adversities in recent months, with the latest PMI data continuing to show a strong performance despite some loss of growth momentum in September," said <keyword id="2835710" type="General" weightage="50" keywordseo="pollyanna-de-lima" source="Orion">Pollyanna De Lima</keyword>, Economics Associate Director at S&amp;P Global Market Intelligence. The upturn was reportedly restricted by price pressures, an increasingly competitive environment and unfavourable public policies, the survey said. <keyword id="15735" type="General" weightage="50" keywordseo="lima" source="Orion">Lima</keyword> further noted that the steep depreciation of the rupee seen towards the end of the month due to interest rate hikes in the US present additional challenges to the Indian economy. "Currency instability poses renewed inflation worries as imported items become more costly, and undoubtedly means that the <keyword id="30067" type="General" weightage="50" keywordseo="rbi" source="Orion">RBI</keyword> will continue hiking interest rates to protect the rupee and contain price pressures," Lima said. On September 30, the monetary policy committee (<keyword id="6369693" type="General" weightage="50" keywordseo="mpc" source="Orion">MPC</keyword>) of the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (RBI) raised the key lending rate or the repo rate to 5.90 per cent - the highest since April 2019. The MPC also decided to remain focused on the withdrawal of the accommodative policy stance to ensure that inflation remains within the target going forward, while supporting growth, RBI Governor <keyword id="6359111" type="General" weightage="50" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> said. According to Lima, an upturn in inflation could damage consumer spending, dampen business confidence and test the resilience of the Indian service sector in the coming months but, at least for September, service providers were strongly upbeat towards growth prospects. The survey further noted that weak external demand weighed on overall sales, with international orders declining further in September. Monthly contractions have been recorded in each month since the onset of COVID-19. The data highlighted a continued revival in business confidence, with sentiment at its highest level in over seven-and-a-half years. Service providers signalled a further increase in their operating expenses during September, owing to higher energy, food, labour and material costs. On the employment front, though capacity pressures moderated in September, efforts to clear pending workloads and ongoing expansions in sales supported another round of job creation. However, employment rose at a slower rate than in August, the survey said. Meanwhile, the S&amp;P Global India Composite PMI Output Index -- which measures combined services and manufacturing output -- slipped from 58.2 in August to 55.1 in September, pointing to the weakest rate of expansion since March. Private sector sales rose at the weakest pace in six months, amid softer increases in the manufacturing and services economies. The S&amp;P Global India Services PMI® is compiled by S&amp;P Global from responses to questionnaires sent to a panel of around 400 service sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Data collection began in December 2005. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/indians-are-taking-more-personal-loans-buying-consumer-goods-on-credit-says-report/articleshow/94674739.cms">Indians are taking more personal loans, buying consumer goods on credit, says report</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/whatapp-business-gives-a-new-lease-of-life-to-solopreneurs-across-india-and-bharat/articleshow/94673370.cms">WhatApp Business gives a new lease of life to solopreneurs across India and Bharat</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/news/with-303-vulnerabilities-google-chrome-is-the-riskiest-browser-of-2022-atlas-vpn/articleshow/94673834.cms">With 303 vulnerabilities, Google Chrome is the riskiest browser of 2022: Atlas VPN</a>

You Searched For "rbi covid" and got 8 results

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