In an effort to ensure growth of well-managed and financially-sound urban cooperative banks (UCBs), the Reserve Bank of India (RBI) has proposed withdrawing restrictions on grant of multi-state status for those having a minimum net worth of Rs 50 crore.

Urban co-operative banks get a policy boost

Business Standard

The policy review has finely addressed a number of pressing concerns like persistently high inflation, formation of a bubble in real estate, financial stability as well as development of market infrastructure. By raising key policy rates for the sixth time since March, but by a modest 25 basis points, RBI has again tried to rein in inflation without disrupting the growth momentum. At the same time, its optimistic assessment of the emerging growth outlook, credit growth momentum and year-end level of headline inflation have smoothened the nerves of several market participants.

Comment: M D Mallya, CMD, Bank of Baroda

In the wake of the &ldquo;extreme&rdquo; stress on liquidity last Friday, the Reserve Bank of India (RBI) today said it would ensure the fund flow was adequate, while not diluting monetary policy transmission.

RBI modifies tight stance on liquidity

In line with market expectations, RBI raised repo and reverse repo rates by 25 basis points, keeping the cash reserve ratio unchanged. RBI also stated low possibility of a rate rise in the near future. Inflation continues to be an important concern, and anchoring inflationary expectations without hurting growth remains a great challenge for the monetary policy, given its structural nature.

Comment: Naina Lal Kidwai, HSBC India

The Reserve Bank of India (RBI) today warned about the impact of high current account deficit and large capital inflows on India&rsquo;s economy.

High current account deficit tough to sustain: RBI

The measures announced by the Reserve Bank of India (RBI) are expected to hit home sales and prices are expected to correct by 15-20 per cent in the next two to three months, say real estate consultants and analysts.

Home prices likely to decline

RBI&rsquo;s move to raise repo and reverse repo rates by 25 bps each is a measured response to inflationary pressures that persist in the economy. While business confidence remains positive, the sixth rate rise this year, though moderate, indicates the central bank&rsquo;s unease with inflation staying well above its target range of 4-4.5 per cent in the short term.

Comment: Jacques Michel, BNP Paribas India

With the current round of policy rate hikes, RBI has cumulatively raised repo rate by 150 basis points, reverse repo rates by 200 basis points and cash reserve ratio by 100 basis points since October 2009. We believe RBI has done a commendable job of ensuring that the economy smoothly sailed through the rate normalisation process without disrupting the growth momentum. The Indian economy is in a comfort zone as far as domestic growth momentum is concerned.

Comment: Ajay Srinivasan, Aditya Birla Group

The rise in repo and reverse repo rates by 25 basis points each indicate that RBI is confident on the growth front but worried about the progress on inflation. Although industrial growth has begun to moderate, credit offtake in the first half of 2010-11 has been slow and there is no strong evidence of a generalised demand pressure on core inflation (non-food manufacturing inflation), RBI chose to raise rates. The decision also reflects how the macroeconomic scenario, the nature of global risks and the pattern of inflation have complicated the task of monetary management. Although overall food inflation is moderating, it remains sticky at high levels for some items like eggs, meat and fish due to structural factors and inadequate supply response. The food-led inflation is typically difficult to address directly through monetary tightening, which will at best restrict the second-round effects of high food inflation spilling to other sectors through wage price spiral.

Comment: Dharmakirti Joshi, Chief Economist, Crisil Ltd

With the central bank raising repo and reverse repo rates by 25 basis points to 6.25 per cent and 5.25 per cent, respectively, borrowing rates will go up for consumers as well as for developers. However, the move is in line with expectations. Inflation remains a matter of concern for the federal bank and it was obvious that it would be increasing repo and reverse repo rates to check the rising prices.

Comment: Pradeep Jain, Chairman, Parsvnath Developers

Unlike the last two quarters, when RBI&rsquo;s main worry was generalised inflation, the bigger concern now appears to be the structural nature of food inflation and rising asset prices. The cumulative 300-basis-point increase in effective policy rates from the trough is likely to contain inflation, while tighter prudential norms will aid in containing any overheating in the housing market. Looking ahead, RBI has hinted at a pause in the near term. In its forward looking statement, RBI states that based on the current growth-inflation trends, &ldquo;the likelihood of further rate actions in the immediate future is relatively low&rdquo;. Therefore, only sharp deviations from base line will elicit future policy response.

Comment: Sonal Verma, India Economist, Nomura Financial Advisory

The second quarter review of RBI indicates policy rates are closer to normal and consistent with growth and inflation. The calibrated steps RBI has been taking since the beginning of this year have reined in core inflation while helping the economy operate near trend.

Comment: M V Nair, CMD, Union Bank of India

The increase in repo and reverse repo rates by 25 basis points is in line with expectations. These are steps towards taming inflation and may not affect the pace of economic growth at this juncture.

Comment: S Mahalingam, CFO Tata Consultancy Services

For Venkat Ananthraman, 46, it was just like a homecoming when he rejoined Standard Chartered as the managing director responsible for mergers and amalgamations, leveraged finance and equity corporate finance at the end of September. A metallurgical engineering graduate from Jadhavpur University in 1985, Ananth (as he is affectionately known by his colleagues), started his banking career in 1987 with Bank of America in corporate banking and project financing.

BS People: Venkat Ananthraman

While the Indian economy continues to demonstrate robust performance, the global monetary conditions present a potential risk to India in the near future. We live in a fairly tentative global environment and it would take some sustained and careful management by central banks across the world to ensure the global recovery is sustainable. Considering this background, RBI is rightly focused on managing inflows and inflationary conditions.

Comment: Koushik Chaterjee, Group CFO, Tata Steel

The Reserve Bank of India (RBI) today raised its key policy rates by a quarter percentage point each to combat inflation, but signalled a pause by saying that &ldquo;the likelihood of further rate actions in the immediate future is relatively low&rdquo;.

Central bank hikes rates, signals a pause in cycle

RBI raised repo and reverse repo rates by 25 basis points each, just as the markets expected. We had forecast that rates would be unchanged given the recent aggressive tightening. In line with our expectation, RBI hinted at a short-term pause by saying &ldquo;the likelihood of further rate actions in the immediate future is relatively low&rdquo;. Also, RBI tightened the lending rules for mortgage loans.

Comment: Rajeev Malik, Senior Economist, CLSA

RBI&rsquo;s assurance on liquidity, bond buyback calm markets.

CP-CD rates ease on RBI liquidity infusion steps

Banks&rsquo; investments in non-financial companies will now come under the Reserve Bank of India&rsquo;s (RBI&rsquo;s) scanner. They will have to take prior approval from RBI before floating or investing in non-financial companies.

Banks will need nod before investing in non-financial companies: RBI

Reflecting the shortage of liquid funds in the system, banks on Monday borrowed over Rs 1,16,000 crore from Reserve Bank of India&rsquo;s (RBI&rsquo;s) Liquidity Adjustment Facility (LAF). They covered themselves to meet prudential norms for liquidity.

Banks borrow over Rs 1,16k cr from RBI liquidity window

You may need to be extra careful while writing cheques in future. Bank regulator Reserve Bank of India (RBI) as well as banks are becoming more strict about individuals issuing cheques.

Banks propose closing accounts with insufficient balance

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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