Skip to main content

RBI interest rate setting panel starts 3-day meet

By
The 6-member Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, started three-day deliberations here today to decide on the key interest rate amid elevated oil prices and inflation hovering around 5 per cent. Experts are divided in their opinion about the likely action of Reserve Bank of India on the benchmark lending rate. While some said the central bank will maintain status quo on Wednesday, others did not rule out another rate hike.
The MPC is meeting for the third bi-monthly Monetary Policy Statement for 2018-19. The resolution of the MPC will be made public in the afternoon of August 1. RBI had increased the benchmark short term lending rate (repo rate) by 0.25 per cent to 6.25 per cent in its last policy review in June on inflationary concerns. The retail inflation, which is factored in by the MPC, spiked to a five-month high of 5 per cent in June on costlier fuel.
The government has mandated the Reserve Bank to keep inflation at 4 per cent (+/- 2 per cent). Experts also opined that the government's decision to substantially hike the minimum support price for Kharif crop will have adverse impact on inflation. While crude oil prices have come off the three year high, they continue to be volatile threatening inflation and current account deficit. In a research report, India's largest bank SBI said that the RBI may not go for another round of rate hike at this juncture.
"We believe August rate decision is a close call, though we believe status quo rather than a hike looks the best option," it said.The only reason for a rate hike by RBI at this juncture might be to "satiate the self fulfilling prophecy" of market expectations of a rate hike to stem the rupee depreciation (though rupee depreciated by 3 per cent post June), it added. In SBI's view, inflation risks are still evenly balanced.
While the MSP hike could statistically push up CPI by 73 basis points, such inflation is unlikely to materialise as it is purely subject to procurement by the central/state governments. Edelweiss Securities said: "In the upcoming policy review, we expect MPC to maintain its neutral stance while keeping the rates unchanged." Global financial services major DBS in a research report, however said RBI is expected to go for further rate hikes this fiscal, with the next increase in the August meet.
According to DBS, upside risks to inflation and a need to maintain financial markets' stability will keep monetary policy on a tightening bias. "We expect 50 bps more hikes in 2018-19, with the next likely in August," Radhika Rao, an economist with DBS said. Private sector lender HDFC Bank believes that the decision on rate hike is a "close call" for RBI, but its rate-setting panel will go for a status quo on key policy rates in the upcoming policy review meet. "It's a close call and a tough balancing act, but we expect RBI to tilt in favour of a 'hold'," its house economists said in a note.
The Business Standard, 31st July 2018, New Delhi

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more