Tag: Reserve Bank of India

Key resolutions taken by RBI at April Monetary Policy Committee Meet

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is meeting from June 4-6 to decide the key interest rates, CNBC-TV18 looks at the key resolutions taken by the first bi-monthly monetary policy meeting in April.

Here are the few key takeaways from the previous MPC meeting:

1.  In its first bi-monthly policy meeting, MPC kept the repo rate unchanged at 6% and the reverse repo rate unchanged  at 5.75% under the liquidity adjustment facility (LAF).
2. The MPC’s decision was consistent with the neutral stance of monetary policy in achieving a medium-term target for consumer price index (CPI) inflation of 4%.
3. The projected CPI inflation for 2018-19 was revised to 4.7-5.1% in H12018-19 and 4.4% in H2, including the House Rent Allowance (HRA) impact for central government employees, with risks tilted to the upside. Excluding the impact of HRA revisions, CPI inflation is projected at 4.4-4.7% in H12018-19 and 4.4% in H2.
4. Retail inflation, measured by the year-on-year change in the
   Consumer Price Index (CPI), fell from a high of 5.1%  in January to 4.4% in February due to a decline in inflation in food and fuel.
5. Inflation in respect of liquefied petroleum gas declined in line with international price movements. Furthermore, the rate of increase in prices of firewood and chips and dung cake moderated.
6. The CPI inflation excluding food and fuel remained unchanged at 5.2% for the third consecutive month in February, after rising from its trough in June 2017.
7. Liquidity in the system moved between surplus and deficit during February-March 2018. From a daily net average surplus of  Rs 272 billion during February 1-11, 2018, liquidity moved into deficit during February 12-March 1, reflecting a slowdown in government spending and large tax collections.
8. In mid-March, additional liquidity of Rs 1 trillion got released into the system through redemption of Treasury Bills issued under the Market Stabilisation Scheme (MSS) in April and May 2017.
9. On the whole, the RBI  injected Rs 60 billion and Rs 213 billion on a net daily average basis in February and March, respectively. The weighted average call rate (WACR) inched closer to the policy repo rate from 12 basis points below the policy rate in January to 7 bps in February, and 5 bps in March.
10. Net foreign direct investment moderated in April-January 2017-18 visà-vis the level a year ago. Foreign portfolio investors made net purchases in 2017-18, despite net sales in the wake of a global sell-off in February. India’s foreign exchange reserves were at $424.4 billion on March 30, 2018.

For full text: RBI keeps repo rates unchanged at 6%; key takeaways

>>Follow our full coverage of RBI Monetary Policy here

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IDFC Bank and Capital First get RBI nod for merger

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) on Tuesday has issued a no objection certificate for the merger of IDFC Bank and Capital First.

Capital First Home Finance and Capital First Securities will also merge with the IDFC Bank.

Capital First is being acquired by IDFC Bank for around $1.5 billion.

“The RBI has, via its letter dated June 4, 2018, conveyed its ‘No Objection’ for the voluntary amalgamation of Capital First Limited, Capital First Home Finance Limited and Capital First Securities Limited with IDFC Bank Limited, subject to compliance with the terms and conditions specified therein,” the bank said in a late night BSE filing.

Rajiv Lal, managing director and vice chairman of the IDFC Bank, will be the non-executive chairman of the merged entity. V Vaidyanathan, executive chairman of Capital First Ltd will be the CEO of the new entity.

“IDFC Bank has 2.5 million customers and merged entity will have about six million customers,” Lal told CNBC-TV18.

The merger process will be completed in 4-5 months, said Lal.

After getting the RBI’s approval, IDFC Bank will now have to approach the shareholders and creditors of the merged companies and a nod from the National Company Law Tribunal (NCLT) is also required for the merger.

Capital First, provider of loans to small businesses, is backed by buyout firm Warburg Pincus.

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Know the faces on the RBI’s Monetary Policy Committee

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The market is eagerly waiting for Reserve Bank of India’s (RBI) announcement on the interest rate changes in its second bi-monthly monetary policy meeting review on Wednesday.

The Monetary Policy Committee (MPC), which takes the decisions on the same, was put to effect by the RBI Act, 1934 and is comprised of six members, three of which are members of the RBI, while the rest are appointed by the Government of India.

Here are the who’s who of the MPC:

Urjit R. Patel, Governor, Reserve Bank of India:

The Governor of RBI, since 2016, is the head of the committee responsible to formulate, implement and monitor the monetary policies, based on the current trends in economy in India and around the world.

A Ph.D holder from the Yale University, Patel is the 24^th RBI Governor and has the veto power in case of a tie, while deciding the rates.

Previous to his appointment as the governor, Patel served as the deputy-governor of the central bank for six years and has worked with the International Monetary Fund (IMF).

Viral V. Acharya, Deputy Governor, in-charge of Monetary Policy:

The youngest deputy governor, Viral Acharya, took the post in 2016 and has been a part of the committee since.

He has also served on the international advisory board of the Securities and Exchange Board of India (Sebi).

In the first bi-monthly policy meeting of RBI in April, Acharya said he would vote for either a neutral to ‘withdrawal of accommodation’ in the upcoming meeting, citing an upside risk to inflation.

Michael Debabrata Patra, Executive Director:

Michael Patra is one of the three member of RBI and serves as the executive director of the MPC since 2014. Patra was nominated by the central board under Section 45ZB(2)(c) of the Reserve Bank of India Act, 1934

The director of Export-Import Bank, Patra in one of his speech said, “Monetary policy decision making is always complex and severely testing. It is typically undertaken in an explosion of diverse views, each differing from the other in expressing intensity and fervour.”

Ravindra H. Dholakia, Professor, IIM Ahmedabad:

A member of the development and evaluation committee at Ahmedabad’s Indian Institute of Management (IIM), Ravindra Dholakia has been the on the MPC since September 2016 onwards, appointed by the government under the Act of Parliament

Pami Dua, Director, Delhi School of Economics:

A known name in the academic circle in Delhi, Pami Dua, Director, Delhi School of Economics, has served on RBI advisory groups and was a member of the committee on data and information management constituted by the central bank in 2014.

Dua’s colleagues at the university say, she is an ideal choice to join the panel that will steer India’s monetary policy for the next four years.

Chetan Ghate, Professor, Indian Statistical Institute:

Chetan Ghate, a professor at the Indian Statistical Institute (ISI), Delhi centre, has worked extensively on economic growth, fluctuations, economic development, and monetary and fiscal policy in developing and emerging market economies.

He was one of the five members of the expert committee of RBI to revise and strengthen the monetary policy framework.

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Key factors to watch out for in RBI’s policy review on Wednesday

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Monetary Policy Committee (MPC) will be announcing its second bi-monthly policy review for 2018-19 on Wednesday.

Credit rating agency CARE expects the six-member MPC to keep the policy repo rate unchanged at 6%.

“With no additional data point on inflation, inflationary expectations would play an important role. These would only be in the upward direction. Therefore, there would be no rate change this time,” said the research note by CARE Ratings.

However, the report expects that the tone will be hawkish and the rates night go up in coming months.

The RBI’s credit policy comes at an important time when the perspective of the economic situation goes beyond the CPI inflation number which is officially targeted.

According to the report, The ten years’ GSec yields have moved up quite sharply since the last policy while some banks have started increasing their lending rates too.

The rupee has also started depreciating and globally too, it looks like Fed will go in for another rate hike, said the report.

Foreign portfolio investment (FPI) flows have already witnessed the impact under these conditions. FPIs have been moving out of the country in the last two months in both equity and debt segment.

Factors To Be Considered For The Policy Review

Inflation has been relatively higher with CPI inflation being 4.6% and WPI inflation 3.2% in April 2018. The inflation is likely to go up further with rising global crude oil prices.

The rupee has come under pressure and instead of a rupee appreciation, which was the norm sometime back; the level of depreciation is being spoken of in the market.

FPIs have been moving out of the country in the last two months and what is curious is that it is negative in both the equity and debt segments.

Therefore, there is a concern for the RBI considering that the limits and tenures of investment for FPIs have been relaxed  by the central bank to enable higher flows.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

PMO may step forward to convince RBI on diluting February 12 circular, says report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Prime Minister’s Office (PMO) may come forward to convince the Reserve Bank of India (RBI) on diluting its new circular regarding the provisioning for loan defaults, reported The Times of India.

According to the report, the development comes after the Union Finance Ministry failed to impress the RBI to relax the norms leading to a massive spike in provisioning by lenders and heavy loss for state-run players.

Several banks have been hit after the RBI’s February 12 circular directing lenders to provide funds for possible losses even in case of a day’s delay in loan repayment, the report said.

The report said the move came at a time when the economy was just recovering from a crisis, affecting financial health and leading to a piling of debt.

According to the report, government hopes the RBI to make some adjustments given the rapport between the Prime Minister Narendra Modi and the RBI Governor Urjit Patel.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI’s “overreaction” to inflation data is always a concern, says Niti Aayog chief

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) should not panic into believing that a slight spike in core inflation is a “sign of inflationary expectations getting entrenched”, Niti Aayog Vice Chairman Rajiv Kumar told The Indian Express.

The visible increase in core inflation could just be a “transitory phase”, said Kumar.

Core inflation, which excludes food and fuel components, jumped to 5.92% in April versus 4.9% five months ago in November, raising the possibility of headline inflation following suit.

As core inflation rises, there is an expectation that the RBI may hike its key policy lending rate, or the repo rate. The six-member MPC has kept benchmark interest rates unchanged at 6% since June 2017, with a neutral stance.

Kumar’s comments come as the Monetary Policy Committee (MPC), the rate-setting body of the RBI, began its second bi-monthly review from June 4-June 6 in Mumbai. The resolution of the MPC will be announced after 2.30pm on June 6.

When asked whether the RBI may overreact to rise in CPI inflation, Kumar said: “RBI’s overreaction is always a concern. The word is overreaction and the key is how you define overreaction”.

“Here, the key is that core inflation is already higher than retail inflation. That’s something of a worry. I looked at the composition of core inflation. The three biggest contributors are health, education and real estate, a sector which has been down and is not finding buyers. But for some reason, prices have picked up in the real estate sector. The reason may be that housing allowance has been raised,” Kumar told The Indian Express.

In the minutes of the last MPC meeting released in April, two members of the committee, RBI Deputy Governors Viral Acharya and Michael Patra, flagged the risks from core inflation, indicating a need to move towards a hawkish stance.

The MPC had forecast inflation to remain between 4.7-5.1% in the first half the current financial year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Know all about the new deputy governor of RBI, MK Jain

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government on Monday appointed IDBI Bank chief executive officer Mahesh Kumar Jain as the deputy governor of the Reserve Bank of India (RBI) for three years.

The decision comes ahead of the central bank’s bi-annual monthly policy meeting.

Jain, who has more than 30 years’ experience in the banking industry, has been the CEO and MD of IDBI Bank since April 2017 and has also served as the CEO of Chennai-based Indian Bank from November 2015 to March 2017.

Before his stint at Indian Bank, he was the general manager of Syndicate Bank.

Jain started his career with Punjab National Bank (PNB) and has over thirty years of banking experience in diverse areas and roles.

Jain has also served on the several boards including Exim Bank, NIBM, IBPS and others.

Jain has also served on several banking sector committees such as secretary and coordinator to Basant Seth Committee on Review and Revamp of Internal and Concurrent Audit System in Public Sector Banks (PSBs), member on the government-formed panels on PIL on NPAs for submission to Supreme Court and redesigning annual performance appraisal reports of PSB officers.

Jain is a post-graduate in commerce with an MBA and FRM degree.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow