Monetary Policy 21 Mar 2013 by Tojo Jose

RBI makes an irrelevant repo cut for growth revival and no action on liquidity front

RBI makes an irrelevant repo cut for growth revival and no action on liquidity front

The RBI’s new monetary policy intervention may not make any impact on growth, inflation and liquidity. Only change is the 25% cut in repo rate. Banks may not make any cut in their lending and deposit rates because the repo cut is too small for them to initiate a cycle reversing interest rate cut. Of course, the SBI, which is the price leader in the industry, was asking for a 50 bps cut to initiate any sort of action on interest rate cut. But, the 25% repo reduction is too low. Besides, the financial sector is to face tight liquidity in the coming weeks because of the closing of the financial year.  This means that, there is no effect for the RBI’s last tow cuts in

Read More »
Monetary Policy 08 Mar 2013 by Tojo Jose

New bank licenses: Private sector players emerges aggressive

New bank licenses: Private sector players emerges aggressive

The new bank license policy issued by the RBI has so far attracted many private players to start banking business. Ambitious corporate including L & T Finance Holdings, Reliance Capital, Tata Capital, Aditya Birla Financial Services, Mahindra and Mahindra Financial Services Religare and India bulls are preparing to unveil their strategies. But some credible public sector players are either silent are not getting enough government patronage amidst the private sector attracting limelight. The IFCI, India Post etc are having enough merit to start banking business. IFCI is the first Development Financial Institution (DFI) in India. Most of its peers including the IDBI and ICICI; who w

Read More »
Monetary Policy 29 Jan 2013 by Tojo Jose

RBI ends clinical trial on the economy; brings rate cuts

RBI ends clinical trial on the economy; brings rate cuts

The RBI today has made a late but meager 25% basis point cut in the policy rate (repo rate) along with the same amount of reduction in the CRR. The current repo rate cut is the first one in the since April 2012.                           RBI has observed that now it is critical to arrest growth momentum. Economy is registering cumulative decline in GDP growth rate during the last seven quarters. It is expected that this year, the Indian economy is going to register the lowest growth rate in the last ten years.         

Read More »
Monetary Policy 28 Jan 2013 by Madhusoodhanan Kartha

RBI acknowledges the need to abandon its shadow fighting on inflation.

RBI acknowledges the need to abandon its shadow fighting on inflation.

In the just published third quarter review of the macroeconomic and monetary developments, the RBI recognizes that growth risk is the biggest macroeconomic problem now. This is the first time in the last three years that the central bank is speaking for resurging growth momentum. So far, its high interest rate policy is blamed responsible for deepening the slow down. Inflation has not come down to its comfort zone even with the adoption of hard interest rate for so long.The present stand from the RBI is indicating that the central bank may opt for a policy rate (repo rate) cut in the next monetary policy revision. If it is sincere to the current observation that slow down is a risk

Read More »
Monetary Policy 08 Dec 2012 by Tojo Jose

Why the RBI’s monetary policy is not delivering?

Why the RBI’s monetary policy is not delivering?

The last monetary policy revision by the RBI governor on October 30 has witnessed the central bank continuing with its high interest rate policy in the cover of inflation combating despite fall in GDP growth rate to new unbearable lows. Finance Minister P Chidambaram has outraged that the government is making a ‘walk alone’ on the growth front because of the unfriendly monetary policy stance by the RBI. The macroeconomic environment at present is dominated by the undesirable combinations of slowing growth, high inflation and persistence of high interest rate.            The RBI is going to make a mid-quarter monetary po

Read More »
Monetary Policy 24 Nov 2012 by Tojo Jose

LIC saves government from agony on one more day

LIC saves government from agony on one more day

The LIC and a few public sector banks purchased the almost unsold shares of Hindustan Copper Limited in thursday’s FPO. This is the second time in eight months that the LIC is pouring money into governments’ disinvestment programme.                  In March this year, the last minute intervention by the LIC has rescued the ONGC offer for sale from a near collapse. The government collected nearly Rs 12500 crores from the ONGC disinvestment because of the help from LIC.                  How far government can st

Read More »
Monetary Policy 14 Nov 2012 by Alexin George

NIB: Grease to Increase Ease

NIB: Grease to Increase Ease

National Investment Board, a super board is expected to be created soon -- proffers Mr. Montek Singh Ahluwalia . “Most of the ministries now agree to the proposal”. The news comes in the wake of World Bank placing India in the 132nd position out of the 185 countries surveyed for the “ease of doing business”. India is considered as one among the worst destinations for investors. It is a reality that the rate of flying out of investments is growing in India. This happens when the regional neighbors of India are improving their ranks up in the index. The proposed NIB is expected to fill the atmosphere with the required amount of positivism, so that inflows wi

Read More »
Monetary Policy 14 Nov 2012 by Alexin George

When CAG claims Paramountcy

When CAG claims Paramountcy

Mr. Narayanaswamy, the Minister of State in PMO, has sparked off a constitutional debate. He set off the bunch of remarks, may be to gauge public opinion for the radical restructuring of the supreme audit institution of India, once recommended by the V.K. Shungulu committee. The comptroller and auditor general, created under the article 148 of the Indian constitution is so distinguished that it is even compared to the Supreme Court of India. The CAG is equivalent to a Supreme Court judge, his tenure is assured, functional independence is guaranteed, and could be removed only through impeachment by the Parliament of India. CAG is a single member body. The debate recently started sp

Read More »
Monetary Policy 30 Oct 2012 by Tojo Jose

RBI maintains high interest rate policy; but cuts CRR to inject liquidity

RBI maintains high interest rate policy; but cuts CRR to inject liquidity

There is no change in the hard interest rate policy of the RBI as the central bank has keptthe interest rate anchor repo at 8%. The step was more expected as the retail inflation for the last month was nearly 10%.But at the same time the quantitative instrument of CRR has been cut by 25% to easeliquidity into the system. The CRR cut will inject RS 17500 crores into the banking system.The CRR cut is just a seasonal intervention as the economy is coming to the midst ofthe busy season and more than that more money is kept at government balances because of the advance tax payment by the corporate sector.Banks were facing liquidity shortages as they were borrowing nearly one lakh crorer

Read More »
Monetary Policy 15 Mar 2012 by Tojo Jose

No relief! Money remains dear

No relief! Money remains dear

RBI keeps the high interest rate intact. The rather adamant monetary policy has evoked negative sentiments and the stock market has reacted with a strong red.                 The continuation of the tight monetary policy by maintaining higher interest rate may lead to further slowdown of industrial activity- especially in the manufacturing sector. Index of industrial production has recorded a dismal slowing growth during the last two quarters in the background of high interest rate. GDP growth rate declined from 6.9% in Q2 to 6.1% in Q3. Analysts attribute this fall in economic growth to RBI’s dear mo

Read More »