Credit Policy

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Why the RBI is in no hurry to cut interest rates (in charts)

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Inflation and interest rates

The RBI is in no hurry to cut interest rates despite inflation trending low for several months now and there being no obvious immediate reason why it should move up sharply. Raghuram Rajan, the RBI governor, may have good reasons to be cautious though, considering what happened during the previous governor D. Subbarao’s tenure. He took charge as the governor in September 2008 and stayed on for 5 years. His tenure’s start coincided with the global financial crisis. The governor and the government joined hands with a monetary and fiscal stimulus to protect India’s economy and financial markets. Continue Reading →

Filed under: Banks, Economy+Policy, Finance+Markets, News Analysis, CPI, Credit Policy, Inflation, RBI

RBI credit policy: no new rate hikes

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The Reserve Bank of India (link) did the predictable by holding on to rates at current levels in its quarterly monetary policy review. The repo rate has been retained at 7.25% and the reverse repo rate has been kept at 6.25%. Repo is when banks borrow from the RBI to meet temporary funds requirement and the reverse repo is when banks park surplus funds with the RBI.

 

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Filed under: Economy+Policy, Top News, Credit Policy, Interest Rates, RBI, Repo Rate

RBI gives cash in hand, but not a rate cut

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The Reserve Bank of India disappointed those who were looking to it, to complete a troika of measures to lift up investor sentiment. Last week, the European Central Bank said it would buy sovereign euro bonds without any limit, and the US Federal Reserve said it would launch a quantitative easing program that would continue for as long as economic conditions remained weak. Then, the Indian government followed up with a series of reforms, including cutting diesel prices and allowing FDI in a few high profile sectors.
 

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Filed under: Economy+Policy, Top News, Credit Policy, CRR, Interest Rates, Markets Debt & Forex Markets, RBI

RBI Credit Policy: interest rate hikes end

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The Reserve Bank of India held benchmark interest rates constant and left liquidity untouched, and did not cut the cash reserve ratios, as was being speculated. But that was not the big takeaway from the credit policy announcements.

The central bank has indicated that it is done with interest rate hikes, given signs of moderating inflation and slowing growth, and will now shift to using interest rate cuts to jumpstart growth again.

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Filed under: Economy+Policy, Top News, Credit Policy, Economy Economarkets, Interest Rates, RBI

RBI hikes repo rate, growth comes second to price stability

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The Reserve Bank of India’s credit policy announcements met expectations, except of those people who thought today will signal the end of the rate hike juggernaut. The few who feared the RBI may hike the repo rate by 50 basis points were off the mark, however. The majority were expecting a 25 basis point hike, which is what the central bank has done.

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Filed under: Economy+Policy, Top News, Credit Policy, Inflation, Interest Rates, Markets Debt & Forex Markets, RBI

RBI goes by the script, hikes rates by 0.25%

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The Reserve Bank of India (RBI) stuck to its trajectory of calibrated rate hikes in the current credit policy too. It hiked the repo rate by 25 basis points to 6.5% and the reverse repo rate also by 25 basis points to 5.5%. The repo rate is what banks pay to the RBI to borrow funds to meet short term liquidity needs and the reverse repo rate is what they get from the RBI, when they park surplus funds with the central bank.

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Filed under: Economy+Policy, News Analysis, Credit Policy, Interest Rates, Policy From the Regulators, RBI

RBI lowers liquidity but leaves rates unchanged

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The Reserve Bank of India announced its quarterly monetary policy today. It left benchmark rates unchanged, like the repo rate (the rate at which banks borrow from the RBI) and the reverse repo rate (the rate at which banks park their surpluses with the RBI. What it did was to hike the cash reserve ratio by a good 75 basis points, taking out Rs 36,000 crore from the banking system. Cash reserve ratio is the proportion of deposits that banks must set aside as a reserve. Apart from this, the RBI has not made any changes and the Annual Policy will be announced on April 20. Continue Reading →

Filed under: Economy+Policy, Top News, Credit Policy, Inflation, Interest Rates, Monetary Stimulus, RBI

RBI leaves rates unchanged but talks down expectations

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The Reserve Bank of India left benchmark interest rates untouched in its quarterly credit policy statement, released today. That was as expected. But RBI Governor D. Subbarao, has made it clear that once clear signs of a recovery are evident, and if prices are ruling higher, the RBI will move swiftly to hike rates. At present, it is holding back pre-emptive action, to give room for consumers to borrow and buy and thereby generate demand for industries to grow. Continue Reading →

Filed under: Economy+Policy, News Analysis, Credit Policy, D Subbarao, Inflation, Interest Rates, Policy From the Regulators, RBI

RBI’s credit policy stands still

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Reserve Bank of India

The Reserve Bank of India announced its third quarter review of the monetary policy today, disappointing the rate-cut hopefuls by leaving all key benchmarks unchanged. In the past few months, the central bank has provided enough leeway, by reducing interest rates and adding to cash in the banking system, for banks to start lending again.
 

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Filed under: Economy+Policy, Top News, Credit Policy, CRR, Interest Rates, Markets Debt & Forex Markets, RBI, SLR