Skip to main content

RBI not done with easing, to cut rates in Oct and early next year: Poll

By
The Reserve Bank of India (RBI) will cut interest rates again at its October meeting, making it the fifth in a row, according to economists in a Reuters poll who said the central bank's decision to ease by 35 basis points on Wednesday was right. While a survey taken ahead of August's meeting showed a 25 basis points rate cut was a done deal, the RBI was expected to keep rates unchanged for the rest of this year.  However, a more recent Reuters poll, conducted Aug 7-8, predicted the RBI would ease its benchmark lending rate by 25 basis points to 5.15% in October. If it does cut again as forecast it would be a repeat of a cutting spree last seen in 2000-01 After the expected October cut, the RBI is then forecast to ease by 15 basis points to a near decade low of 5.00% in the first quarter of next year, although much depends on global conditions. "India is amidst an economic and financial slowdown with minimal support from fiscal policy. The responsibility is being borne by monetary policy but more is needed at this front," said Shobana Krishnan, chief economist at Edelweiss. "Traditional parameters of growth and inflation are far from showing any near term pickup. Therefore, we believe the case for another 50 basis points cut in fiscal year 2020 is justified."
 
The central bank cut rates by 35 basis points to 5.40% this week but maintained its "accommodative" policy stance, signalling further easing on concerns about weak economic growth and subdued inflation. If the RBI does cut rates in October and early next year it will be the most aggressive amongst major central banks in easing policy.  The RBI lowered its economic growth forecast for the current fiscal year on Wednesday and said inflation would not breach its medium-term target of 4% in the near-term. However, the benefits of the RBI's easing this year have not been completely transmitted to borrowers. "The transmission of rate cuts has been fairly weak so far," said Rini Sen, India economist at ANZ. "Bank lending rates have not moved in tandem with the repo rate, which raises doubts over how much of this easing eventually trickles down to the real economy." When asked if the RBI's decision to not cut interest rates in a multiple of 25 basis points was right, over 85% of 45 economists said "yes". That supported Governor Shaktikanta Das' statement that a 25 basis points cut would have been "inadequate in view of the evolving global and domestic macro-economic" conditions, while a 50 basis points cut was seen as potentially "excessive." "In an environment of prolonged stress, unconventional policy easing is likely to be growth supportive in our view," said Shashank Mendiratta, economist at IBM. 
 
Business Standard, 9th August 2019

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