RBI announces 50 bps Rate Cut; FM welcomes

The Union Finance Minister Shri Arun Jaitley said that the Government welcomes the Reserve Bank of India (RBI)’s decision to reduce the repo rate to 6.75 percent from 7.25 percent. The Finance Minister was responding to the Monetary Policy announcement made by the Reserve Bank of India today.

The Finance Minister said that constant vigilance is warranted on the inflation front, this action signals that inflationary pressures have moderated significantly and are within the RBI’s comfort zone. He said that the Government is committed to meet its fiscal deficit target to consolidate the gains achieved in reducing the inflation.

The Finance Minister Shri Jaitley further said that this action also signals that the RBI is able to provide policy support to the real economy and help its recovery. He said that the Government looks forward to the transmission of these cuts to the rest of the economy and will work to facilitate this transmission, including by reviewing the framework of small savings. Shri Jaitley said that the rate cut, combined with actions taken and planned by the Government, will help boost confidence and investment, and help realize the economy’s medium-term potential growth rate.

The Finance Minister Shri Jaitley further said that Indian corporates would now be able to raise External Commercial Borrowings (ECB) through rupee denominated offshore bonds with no end use restrictions. He concluded that this would provide additional source of raising resources which would be fully hedged as they are denominated in rupees.

Shri Shaktikanta Das, Secretary, Department of Economic Affairs (DEA), Ministry of Finance said that the Medium Term Framework for FPI investment in Government Securities would bring in predictability for foreign investors. He said that the limits would be increased from existing 3.8% to 5% of the outstanding stock of Government Securities by March 2018 implying increase by about Rs 1,20,000 crore from the existing limit of Rs 1,53,500 crore.

Shri Das said that in the current financial year, Rs.26,000crore would flow in the Government Securities. He said that the increase in FPI limits would bring in greater foreign participation with predictability and would result in higher liquidity in the Indian Government Securities market. He said that for State Development Loans, FPI limits have been fixed for the first time at 2% of the outstanding stock that would amount to about Rs 50,000 crore by March 2018 and Rs.7,000 crore would flow in State Government Securities during the Current Financial Year. This would bring higher liquidity in these State Government bonds.

The Chief Economic Adviser Dr Arvind Subramanian said that the transmission of rate cut is partly by the banks and partly by the market rates coming down. He reiterated that the Government looks forward to the transmission of these cuts to the rest of the economy and will work to facilitate this transmission, including by reviewing the framework of small savings. He said that the Government would review the GDP rate target for the current Financial year after the figures of second quarter are available.

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SBI organizes 2nd ‘Banking & Economics Conclave’ 2015

Mumbai, India, Aug 20: State Bank of India (SBI) today successfully concluded the 2nd SBI Banking & Economics Conclave 2015. This Conclave was organized with an intention to stimulate debate and critical thinking on various topic related to banking industry in India. The Conclave was inaugurated by Hon. Minister of Finance Shri Arun Jaitley and Minister of State, Finance Mr Jayant Sinha. The Conclave was graced by dignitaries from a wide spectrum of business activity like banking, financial institutions, corporate, law and Government. The high and mighty of Indian corporate - Mr. Baba Kalyani, Ms Kiran M Shaw, Ms Chanda Kochhar; Justice (Retd.) A K Ganguly from judiciary, Mr. Amitabh Kant, Secretary, DIPP and others graced the occasion on Second day.

Chairman SBI in her opening  session with RBI Governor, Dr Raghuram Rajan discussed various issues like payment banks, state of the economy, etc. The Governor in turn emphasized on project evaluation and structuring by banks, issues of HR in banking such as providing higher compensation to top management and its impact on costing. Can ESOPs help retain talent in public sector banks was also discussed.

There were four panel discussions during the day. The first panel discussed the topic: Agenda to rev up growth. According to this panel, to rev up growth there is a need to take measures on ease of doing business. Infrastructure spending is imperative to India’s growth. Nurturing critical talent, scaling up innovation and use of digital technology will drive growth in sectors, in particular, pharmaceuticals and manufacturing.

The second panel discussion was: Judiciary and Banking-The Missing Link. The panel discussion concluded that there is an urgent need to bring the forefront, judicial reform discussion in much greater way than earlier. Adjournments, transparency, accountability and use of IT solutions are some of the key areas where judicial infrastructure needs immediate attention. Banks must ensure that their legal contracts keep abreast with judicial pronouncements.

The third panel discussion was on capital raising for banks in the context of BASEL III norms. The panel was of the view that India needs to tap all sources of capital, be it foreign or domestic. However, some panelists were of the view that BASEL III norms may depress the Return on Equity going forward, which may in turn constrain the future capital raising exercise. Some panelists also felt that profit alone is the starting point for PSBs and profitability and efficiency will require a fine balancing act in future.

The fourth panel of economists discussed the current macroeconomic challenges beyond CPI and Repo Rate. This panel discussed a numbers of issues such as labor productivity, capital intensity of Indian economy, health sector reforms, exchange rates and exports growth. In particular, the panel noted that demographic dividends should be properly used to augment our growth potential.

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RBI keeps Key Interest Rates Unchanged - Cuts SLR by 50 bps

The Reserve Bank of India (RBI) on Tuesday did not change the key interest rates as speculated. But, the apex bank cut the  statutory liquidity ratio (SLR) by 50 basis points. RBI kept the benchmark repurchase rate at 7.75 per cent.

Looking at the macro-economic indicators, it has been speculated by all that the RBI would cut the key interest rates while reviewing its credit policy for the month of January. But, there was not rate cut announcement by the apex bank that led to tumble the stock markets in India.

BSE Sensex fell by around 171 points and the Nifty down by 45 points. Investors were anticipated a rate cut but that was not happened as expected. The Governor of RBI Raghu Rajan said inflation was likely to at around 6 per cent by the end of January 2016 but other factors - monsoon and oil price could be great factors.

Bank stocks fell heavily following the no rate cut by the RBI today at BSE Sensex and Nifty. 

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RBI to review Credit Policy Tomorrow, Scope for Rate Cut?

Tomorrow, the Reserve Bank of India (RBI) will review credit policy, and speculations are buzzing around of possible rate cut. Headline inflation has been moderated, macro-economic indicators favor a rate cut.

Today stock markets ended in flat, BSE Sensex was down by 60 points at Nifty was down by 45 points. But, in the intra-day trading markets were down heavily following weak global cues.  Last week markets were full of volatile but gained by margin.

Tomorrow, the apex bank would review the macro-economic indicators and may come up with a rate cut announcement. Investors would be watching putting their fingers crossed. There are possibility of high returns from the market, if the apex bank favors a cut in the key interest rates  - repo rate, reverse repo rate and cash reserve ration.  On the contrary, the market would nose-dive, if there would not any rate cut announced by the apex bank.

Another big concern about the manufacturing sector's performance. The statistics issued by the government were not convincing for the investors to have confidence on the market. It may trigger a loss any time, and foreign investors would pull out their funds from the market.

In the international market, all the factors are conducing for a possible rate cut - oil prices are falling, EU announces stimulus - Greece issues also most solved, EU to host trade meet with India, China's economy has been growing slowly and the big thing is that India has become partner with US.

A perfect situation for the apex bank to consider for right move to keep the interest of the economy and investor. There is scope for possible rate cut tomorrow and if that happens so then markets would further touch to new high. Lets wait and watch - what RBI decides for us.

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RBI's First Quarter Review of Monetary Policy 2013-14

In its first quarter monetary policy review for FY14 held on July 31st 2013, the Reserve Bank of India (RBI), India’s central bank, decided to leave the policy repo rate unchanged at 7.25 %. The cash reserve ratio (CRR) of scheduled banks was left unchanged at 4.0% of net demand and time liabilities (NDTL).

Projections:

• GDP Growth:5.5% from 5.7%
• Inflation: 5.5%
• M3 Growth (Velocity of Money): Retained at 13%
• Deposit Growth: Retained at 14%
• Credit Growth: Projected growth at 15%

Monetary Policy Stance:

• To address the risks to macroeconomic stability from external shocks;
• To continue to address the heightened risks to growth;
• To guard against re-emergence of inflation pressures; and
• To manage liquidity conditions to ensure adequate credit flow to the productive sectors of the economy.

Guidance:

The policy stance in this review is guided by the need for continuous vigil and preparedness to pro-actively respond to risks to the economy from external developments, especially those stemming from global financial markets, while managing the trade-off posed by increased downside risks to growth

The recent liquidity tightening measures by the Reserve Bank are aimed at checking undue volatility in the foreign exchange market and will be rolled back in a calibrated manner as stability is restored to the foreign exchange market, enabling monetary policy to revert to supporting growth with continuing vigil on inflation

The RBI stands ready to use all available instruments to respond swiftly to any adverse development.

The priority of the RBI in this policy review, like the last one, was to address risks to macro-economic stability from external shocks. Though it noted that inflation has moderated and growth remains weak, the sharp depreciation in the rupee due to capital outflows and uncertainty in the global environment remains a pressing concern.


Risk factors:

The following have been cited as risks to RBI’s macro-economic outlook

The Current Account Deficit (CAD) is currently well above the sustainable level of 2.5% of GDP for three years in a row. For 2012-13, the CAD was 4.8% of GDP, RBI believes that any future announcements of qualitative easing (QE) tapering increases the possibility of further capital outflows. As a result, financing of the CAD becomes a serious macro-economic risk.

Weak investment climate: Business sentiment and investor confidence remain subdued. Moreover, policy bottlenecks continue to stall investment plans, bringing growth under pressure.

Inflationary risks: Supply constraints, particularly in the food and infrastructure sectors continue to pose inflation pressure. The upward push from "imported" inflation due to rupee depreciation and the hike in administered prices could pose risks in coming months.

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RBI hikes Short Term Rates

The Reserve Bank of India (RBI) has initiated its actions to stabilize the rupees, which has been at its lowest value against US dollar in the currency market.

The RBI has hiked the short term rates on Monday to check the devaluation of rupees.

On Monday, the rupee was at around 59.89, and lately the rupee was slipped to its lowest of around 60 rupees.

The aim of the apex bank is to boost the value of rupees against US dollar by chacking the liquidity in the economy.

The latest move by the RBI would discourage the banks to borrow fund and that would ultimately control the liquidity and credit market.

However, the stock markets in India tumbled on Tuesday following the hike the short-term rate. Both BSE Sensex and NSE Nifty were traded in red at morning trade on Tuesday.

The banks may increase the deposit rates to attract more customers and that would help the banks not to draw more from the apex bank for the purpose of credit.

The RBI would also sell the bonds in the open market operation worth 12,000 crore rupees to check liquidity.


On the other hand, following on its economic reforms, the UPA government may further liberalize the FDI norms in some selective sectors to boost the inflow of foreign fund into the country.

Experts believed that the inflow of foreign fund was must to check the devaluation of rupees and Indian economy – that has been under pressure due to the global slowdown.

The Governor of RBI D Subbarao called on the Finance Minister P Chidambaram and discussed about the strategy to strengthen Indian rupees.

The fall in the value of the rupees has been weighing high on the economy.

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RBI guidelines on ‘Control of Indian Companies’ in FDI policy

On Thursday, Reserve Bank of India (RBI) released guidelines on total foreign investment in Indian companies, transfer of ownership or control of Indian companies. With the ongoing debate over control of Jet Airways after UAE’s Etihad bought stake, RBI’s new FDI guidelines will certainly solve the dispute.

The guidelines are regarding Indirect or Direct Foreign Investment (FDI), calculating the total foreign investment, transfer of ownership or control of Indian companies and also on downstream investment by Indian company. Here are a few from those -

Ownership or Control – An Indian company will be an Indian company if 50 or more percentage of capital benefits is owned by Indian residents or companies. And the Indian residents or companies should have the power to appoint majority of the company directors.

Non-resident entity/ies can have control over an Indian company, if more than 50% of the capital benefits are owned by non-resident entity/ies and they’ve the power to appoint majority of the directors.

As per the press notification - Indian companies with such investments between February 13, 2009 and the date of publication of FEMA notification, should intimate the same to RBI within 90 days of the publication of this circular. They should report it to the Regional RBI office under whose jurisdiction the Registered Office of the company is located.

Calculating total FDI would sum up all the non-resident investments made in Indian company. Total foreign investment will be the sum of total direct and indirect foreign investment made in a company.

For more details, you can read the press note released by RBI here

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Names of 26 Applicants for new bank licenses in the private sector

On Monday Reserve Bank of India released the names of applicants for the new banking licenses in the private sector. Among the major names are Tata Sons, Aditya Birla and Bajaj Finserv, whoi have applied for the new banking licenses.

There are also government entities like Department of Posts, LIC Housing Finance, IFCI and Tourism Finance Corporation of India, who have applied for the same. Here is the full list –

1. Aditya Birla Nuvo Ltd., Mumbai.
2. Bajaj Finserv Ltd., Pune.
3. Bandhan Financial Services Pvt. Ltd., Kolkata.
4. Department of Posts, New Delhi.
5. Edelweiss Financial Services Limited, Mumbai.
6. IDFC Limited, Mumbai.
7. IFCI Limited, New Delhi.
8. Indiabulls Housing Finance Limited, New Delhi.
9. India Infoline Ltd., Mumbai.
10. INMACS Management Services Limited, Gurgaon.
11. Janalakshmi Financial Services Pvt. Ltd., Bangalore.
12. J M Financial Limited, Mumbai.
13. LIC Housing Finance Ltd., Mumbai.
14. L & T Finance Holdings Limited, Mumbai.
15. Magma Fincorp Limited, Kolkata.
16. Muthoot Finance Limited, Kochi.
17. Reliance Capital Limited, Mumbai.
18. Religare Enterprises Limited, New Delhi.
19. Shriram Capital Limited, Chennai.
20. Smart Global Ventures Pvt. Ltd., Noida.
21. SREI Infrastructure Finance Limited, Kolkata.
22. Suryamani Financing Company Limited, Kolkata.
23. TATA Sons Limited, Mumbai.
24. Tourism Finance Corporation of India Limited, New Delhi.
25. UAE Exchange & Financial Services Ltd., Kochi.
26. Value Industries Limited, Aurangabad.

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Muthoot Finance to open White Label ATMs

International finance company Muthoot Finance has got the in-principle approval of Reserve Bank of India (RBI) to open White-Label ATMs in India. On Tuesday, RBI has granted the authorization to Muthoot Finance.

White Label ATM (WLA)s are the concept from Canada, where a non-banking entity opens up ATMs. From these ATMs, customers of any bank in the country can withdraw money and for the same the card-holders have to pay a fee.

Muthoot Finance has planned to set up 1000 ATMs in the first year of operation and 8000 in the following year. As per the reports, they’re already in talk with some of the leading Indian banks and also taken the approval of share holders.

Want to know the General criteria for opening up WLAs, the follow this link on the website of RBI.

Last month RBI has permitted non-banking financial institutions to open more WLAs in regards to encourage personal banking. As per the reports, the new WLAs will be set up in non-traditional places, semi-urban and rural areas.

This move will certainly help the rural people to get access to banks easily. Last month, RBI has allowed Tata Communications Payment Solutions, a subsidiary of Tata Communications to set up WLAs around the country and soon many other such institutions will be participating in this initiative.

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Tax Collecting Branches Open in Mar 29th, 30th and 31st

To facilitate Tax Collection, Reserve Bank of India asked banks to keep open their designated tax collecting branches on March 29th, 30th and 30th and 31st. On account of Good Friday March 29th is a holiday while March 31st is Sunday.

Reserve Bank of India, said in a notification that "We have been requested by the government of India and some state governments to facilitate collection and accounting of all government tax receipts for the current financial year (2012-13) up to March 31, 2013 keeping in view the likely rush of tax-payers towards the end of March 2013.”

“Accordingly, it has been decided that all agency banks shall keep the counters of their designated branches conducting government business open (full day with extended hours) on March 29, 30 and 31, 2013 to facilitate receipt of government taxes from members of public even at late hours," RBI said.

Meanwhile, to facilitate tax collection, offices of both income tax and indirect taxes will remain open on March 30 and 31.

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Marginal cut in Small Savings interest rates

In a panel discussion on Monday, at the annual national interest reset discussion, the new interest rates for small national savings schemes have been announced.

As per the recommendation of panel members, the interest rates on small saving schemes have been reduced by 10 basis points or .1% compared to previous years.

The RBI annual interest reset panel was headed by RBI deputy governor Shaymala Gopinath. The new interest rates will be effective form April 1, 2013.

The new interest rate values are –

1) Public Provident Fund (PPF) – interest rate lowered from 8.8% to 8.7%

2) National Savings Certificate (NSC) – interest rates lowered from 8.9% to 8.8%; both on twenty and five year maturity schemes

3) Senior Citizen Saving Schemes - interest rate lowered from 9.3% to 9.2%

There will be no change in interest rates on one year deposit schemes. As per the statements of Planning Commission deputy chairman Montek Singh Ahluwalia, the new rates will be more favorable to depositors in this inflation season.

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Fake E-Mail In The Name of RBI

phishing caution

Now, a fake e mail may land up in your mail box, allegedly from India’s Central bank, asking denizens to secure their bank account details with the RBI. So, any time you get a mail from the RBI think twice. Experts said, this is an attempt by fraudsters to compel people into giving away bank account details and lose hard-earned money, security.

The fake email says that RBI has launched a new security system, asking users to click on a link to open a page with list of banks in place. Once anyone chooses a particular bank, it asks for all net banking details, including card numbers and the secret three digit CVV number, and other details.

The RBI has also been flooded with queries from citizens across the country. A senior RBI official said "I get at least four such calls a day," RBI is cautioning people that the central bank, "has not developed any such software and nor has it sent any such mail asking online banking customers to update their account details to secure their online accounts." The RBI does not even have any mail id with extension@rbi.com, the central bank says.

The bank has warned that "Members of public receiving such mails should not open the attachment and/or try to download the attachment on their computers. This is a phishing mail and accessing the mail in any manner could result in identity theft"

Defense analyst C Uday Bhaskar, said "Online frauds are increasing and predictively so. As your dependency on cyber increases, it concurrently opens up to misuse. People should not panic but awareness must increase in a big way also”

Now the bank is planning a massive pan-India publicity campaign to educate people on such scams and create awareness about not responding to such emails or messages.

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Big Business in Banking?

In a significant development in issuing new banking licenses, the Reserve Bank of India has allowed all private and public sector companies to apply for the banking licenses, as promised in the Union Budget 2010-11.

The last date to apply for get the bank licenses is July 1, 2013. Now the companies those can afford Rs 500 crore for the minimum paid-up capital for setting up a bank can apply for banking licence.

This is a give move by the RBI to strengthen the banking system in India. With the entry of big business houses into the banking system would not only boost the banking system, but also help proved a milestone.

Last time the RBI had issued banking licence to Yes Bank in 2004.

The big business houses like Tata, Mahindra and Mahindra, Aditya Birla Group, L&T, ADAG and Reliance could apply for the banking licence in India.

There will be more private banks in India, once the licences have been issued to the companies, like given to Yes Bank in 2004.

There 26 public sector banks and 22 private sector banks in India. Soon the number private sector banks would go up, after the licencing process is completed.

However, there are some strict guidelines in the new banking lincences system, which need to be followed by the companies those would apply for it.

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RBI cuts repo-rate and CRR by 25bps

The Reserve Bank of India has cut the interest rate by 25 bps on Tuesday, as speculated. The Cash Reserve Ratio was also cut to 4 per cent from 4.5 per cent, by cutting down 25 bps.

The RBI has also cut the repo-rate by 25 basis points to 7.75 per cent from 8 per cent, for the first time since April 2012. The ease in the monetary policy will boost the Indian economy.

The cut in CRR will help to infuse around 1.80 billion rupees into the economy.

Speaking to media, the governor of RBI, Duvvuri Subbarao told that the soften in the headline inflation was the major factor leading for a cut in the interest rates by 25 basis points.

The headline inflation was at 8.1 per cent in the September 2012 and dropped to 7.2 per cent in December 2012.

The GDP was recorded 5.5 per cent in the first quarter and dropped to 5.3 in the second quarter.

The stock markets - BSE Sensex and NSE Nifty gained following the rate cut declared by the RBI.

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RBI Keeps Interest Rates Unchanged

The central bank of India - Reserve Bank of India did not change the key interest rates while reviews its credit policy on Tuesday. The short-term lending (repo) rate and the Cash Reserve Ratio (CRR) will remain at 8 per cent and 4.25 per cent, respectively.

Considering the slide in the headline inflation rate for the month of November 2012, the RBI kept the interest rates intact. The stock markets were in flat following no change in the interest rate.

However the Governor of RBI, D Subbarao hinted for a change in repo-rate and CRR in January 2013.

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RBI may cut interest rates: Goldman Sachs

Goldman Sachs expects that Reserve Bank of India may cut the interest rate on Tuesday while reviews its policy, according to media reports.

The data over inflation for the November 2012 shows slide in the headline inflation.

It is believed that any cut in the interest rate would boost the stock markets in the India. The rate cuts would have positive impact on the liquidity in the country.

There has been also slow growth rate of GDP at 5.3 per cent in July- September. And the core inflation was at 4.5 per cent.

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No Change in CRR and Repo Rate: RBI

Business News: The apex bank of India, Reserve Bank of India on Monday did not change the key interest rates. The Cash Reserve Ratio (CRR) remain unchanged at 4.75 per cent and the repo rate at 8 per cent. It was expected that the RBI may have some variation in the key interest rates to protect Indian economy from the falling value of the rupees in the international market particularly against the US Dollar.

The stock markets in India will have the impact of unchanged key interest rates by the Reserve Bank of India. The markets have been in choppy trading session due the weaken rupees against US dollar. 

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RBI cuts Repo-Rate by 50bps

Business News: The Reserve Bank of India has cut the repo-rate by 50 basis points on Tuesday for the first time in last three years. The impact of the cut in favor of the people as they will pay less for the home, auto and corporate loans.

The apex bank cut the repo-rate to boost the economy and support the liquidity in the market. The soaring inflation has been the major issue for the economy which touched double digit.

The cut in the repo-rates or the key interest rates, the loans will be cheaper and that will boost the liquidity in the market. Companies like auto, realty have been speculation a good response following the recent cut in the repo-rate by the RBI.

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RBI slashes CRR by 0.75%

Business News: The Reserve Bank of India (RBI) slashed the cash reserve ratio (CRR)by 0.75 per cent to 4.75 per cent from 5.5 per cent. The move will help to infuse around Rs.48,000 crore into Indian economy.

The infusion of money into the economy would help to address the inflationary pressure, which is high due to less velocity of funds in the country. The CRR is the portion of deposits that banks need to keep with the apex bank.

The low CRR will also help the banks for having higher liquidity into the market, which ultimately will have greater impact on the economy.

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Food Inflation drops to 4.35%

Business News: The food inflation for the week ended on December 3 dropped to 4.35 per cent giving big relief to the government and Reserve Bank of India. The inflation and food inflation have been the major concern for the government, and the food inflation in India dropped to 4 year low.

In February, 2008 the lowest food inflation was recorded at 4.8 per cent on 23rd of the same month. The fall in the food inflation will give relief to household budget too, as they will pay less for the essential goods and services in the market. As per the WPI data, the price of vegetables dropped by around 12 per cent. 

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