The uneasy relationship between the finance ministry and the Reserve Bank of India was one of the worst kept secrets in the financial sector, but observers say even the fig leaf was taken away today.

Finance ministry, central bank's tense partnership on Pranab's watch

Business Standard

The status quo adopted by the Reserve Bank on Monday disappointed bankers as they were expecting rate cuts, but found takers in economists who hailed the move as a prudent step given the inflationary pressures and lack of any credible fiscal measures.

Bankers miffed, economists hail decision to hold rate

Press Trust of India

The outcome of this weekend&rsquo;s Greek elections was a positive surprise, but some may argue that RBI&rsquo;s decision to keep rates on hold was a negative surprise. We disagree. This was the right decision, and it will serve to strengthen RBI&rsquo;s credibility.

Decision gives credibility boost: Leif Eskesen

Monetary measures

    Repo rate cut by 50 bps to 8%
    MSF borrowing cap raised from 2% vs 1% of banks&rsquo; NDTL
    CRR kept unchanged

Growth projections

    FY13 GDP growth projected at 7.3%
    Non-food credit growth for FY13 projected at 17%
    Deposit growth projected at 16%
    Money supply growth projected at 15%
    March 2013 inflation projected at 6.5%

Regulatory measures

    Banks&rsquo; exposure to gold loan NBFCs reduced
    Banks barred from charging pre-payment penalty on floating-rate home loans
    Unique customer identification code across banks
    Basic savings account with minimum facilities without minimum balance requirement
    Banks asked to put mechanism for early detection of distress assets


Policy in 2 minutes

The Reserve Bank of India (RBI) on Tuesday said banks could borrow up to two per cent of net demand and time liabilities from marginal standing facility as against one per cent earlier, to provide greater liquidity cushion to lenders.

Proactive steps for liquidity promised

The Reserve Bank of India (RBI) on Tuesday mandated banks to reduce exposure in any single non-banking finance company (NBFC) engaged in the gold loan business to 7.5 per cent from the existing 10 per cent of their capital funds. This means banks will have lower funds to lend to these NBFCs, defined as having gold loans to the extent of half or more of their total financial assets.

Exposure limits of banks in gold loan NBFCs cut

The announcement by the Reserve Bank of India (RBI) Governor of a 50-basis-point reduction in the repo rate is a very timely and welcome move. The monetary policy recognises that it is imperative at this time to take measures that support growth. Financial year 2012 has witnessed a decline in India&rsquo;s growth rate. At the same time, inflation has moderated due to the cumulative impact of monetary policy actions taken over the last two years and the headline inflation numbers for March 2012, at 6.9 per cent, have come in close to RBI&rsquo;s projection of 7.0 per cent. Corporate performance has weakened due to higher input costs, higher borrowing costs, and adverse currency movement leading to lower profit margins. The need of the hour is for policy measures that give a fillip to growth and improve sentiment among businesses and households. In this context, the 50-basis-point reduction in the repo rate is a very timely move.

Welcome shift in focus, towards growth: Chanda Kochhar

As the Indian economy appears to be tipping towards a further slowdown, RBI was left with no option but to come out with a supportive monetary policy that could help sustain domestic demand and bolster confidence in the economy. By reducing the policy rates by 50 bps and doubling the borrowing limit of banks from the current level of 1.0 per cent, RBI has sent a strong signal of monetary easing in order to support growth.

A judicious policy in challenging times: M D Mallya

RBI&rsquo;s 50-bp rate cut, which comes after three years, surprised us positively, as we were expecting a 25-bp cut in the April monetary policy meeting. A status quo in CRR rate is, however, in line with our expectations, given the recent improvement in money market liquidity conditions. RBI&rsquo;s move to increase the borrowing limit of commercial banks under the marginal standing facility from one to two per cent of NDTL is also encouraging, as it should help provide a bigger cushion to the banking system in the event of any severe liquidity shortage.

RBI eases while maintaining caution: Gunit Chadha

The Reserve Bank of India (RBI) on Tuesday said banks had not readily extended loan restructuring facilities to small accounts. It asked banks to get a mechanism to detect early signs of distress in asset quality.

Small borrowers deprived of loan recast

After doing its bit to give a push to the slowing economy, the Reserve Bank of India (RBI) had a strong message for the government: Clear supply bottlenecks, curb subsidies and hike petroleum product prices. The measures are expected to improve fiscal health and contain inflation.

Govt asked to clear supply bottlenecks, curb subsidies

The Reserve Bank of India&rsquo;s (RBI) new directive on reducing the variation in interest rates on bulk and retail deposits of similar maturities has failed to find favour with banks.

Reduce variation in retail, bulk deposit rates

The message is loud and clear from the Reserve Bank of India (RBI). While bringing more villages within the realm of financial services remains the focus, steps must be taken to improve service quality and increase the number and value of transactions in these areas, the banking regulator said.

Financial inclusion must be qualitative, not quantitative

The Reserve Bank of India in its Annual Monetary Policy Statement for FY13 embarked on easing monetary policy by delivering a larger than expected dose of 50 bps cut in the repo rate (now at 8.0%). This action was guided by essentially two factors &mdash; that growth has declined substantially below the post-crisis trend rate, and core inflation moving within the comfort level. With this front loading of monetary easing, the RBI has nudged the government to galvanize its efforts to accelerate fiscal consolidation efforts and stimulate business confidence by focusing on mitigating supply bottlenecks through structural reforms.

A pre-emptive bold move

A rate cut from RBI finally came after a three-year hiatus and the extent of easing surprised everybody. With below-trend growth and substantially lower core inflation, there was definitely a case for adjusting policy rates lower but 50bps at one go was a bold move. We think prodding banks to lower lending rates through a decisive move was the main reason for this larger-than-anticipated rate cut.

Mixing surprise with caution: Samiran Chakraborty

The Reserve Bank of India (RBI) was itchier to cut policy rates than expected, but the 50-basis point cut may have been a bit too premature and aggressive, in our view. If the upside risk to inflation materialises, it could hurt RBI&rsquo;s credibility and leave the cuts doing little to raise growth on a sustained basis.

A bit too soon, a bit too much?: Leif Eskesen

It&rsquo;s finally good to see bold moves from policymakers. Problem is, it&rsquo;s the wrong set of policymakers. We need bold moves from Delhi &mdash; to ease the supply constraints that are at the root of the current slowdown. We don&rsquo;t need bold easing from RBI when the inflation battle is still to be won, the current account deficit is at an all-time high and the currency is under pressure.

Need boldness from Delhi, not Mumbai: Sajjid Chinoy

There will be monetary transmission, following the rate cut. The transmission of the last CRR cut could not happen fully, as we thought to wait until the policy and do a comprehensive cut in the lending rates. It will not happen across the board. It will be specific to segments where the mark-up of the base rate is significantly high. So, in our case, it will be largely for the SME sector.

BS Jury

The global economy is at crossroads. The structural problems faced by all developed economies in terms of high fiscal deficit and high government borrowing, coupled with lower growth, is impacting the growth prospects of all emerging economies, including India.

Ahead of the curve, a balancing act: V Balakrishnan

To do or not to do was the big question the RBI Governor answered rather emphatically. When RBI began its rate- tightening cycle in March 2010, India&rsquo;s GDP growth was appearing stable at eight per cent, despite global uncertainties and elevated levels of inflation.

Needed shift in stance: R Shankar Raman

The Bombay Stock Exchange (BSE) Auto Index closed at an all-time high on Thursday, buoyed by the lowering of interest rates and expectations of good sales growth. Gaining for a sixth straight day, the barometer for automobile stocks ended at 10,744.7, up two per cent, the most among all sectoral indices.

Rate cut drives BSE Auto Index to all-time high

Financial Analysis: Find the Latest Financial News Analysis & Research Updates from all top sources for the Indian Finance industry on Business Standard.

Finance News Analysis, Financial Analysis and Research | Business Standard

Find the Latest Financial News Analysis & Research Updates from all top sources for the Indian Finance industry on Business Standard.

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