RBI rewrites stance to less accommodative. RBI rephrases accommodative stance to focus on withdrawal of accommodation. Concerns over protracted supply disruptions have rattled commodity and financial markets. RBI raises reverse repo at 3.35 percent. Inflation is now projected to be higher and growth lower than February's expectations.
Assuming oil at $100. GDP growth seen at 16.2 percent in April-June 2022; at 6.2 percent in July-September 2022; at 4.1 percent in October-December 2022; and at 4.0 percent in January-March 2023. Edible oil prices likely to stay elevated in the near term. Spike in crude oil since end-Feb poses substantial risk to inflation. Inflation projection frought with risk, contingent to global crude prices.
CPI inflation seen averaging 5.7 percent in FY23. It is seen averaging 6.3 percent in April-June 2022; seen averaging 5.0 percent in July-September 2022; seen averaging 5.4 percent in October-December 2022; and seen averaging 5.1 percent in January-March 2023. Macroeconomic outlook going under tectonic shifts, must take preemptive steps. RBI will continue to take nuanced and nimble approach.
Normalisation of Liquidity Adjustment Facility (LAF) corridor done today should not come as a suprise to market participants. Financial markets were prepared for the LAF corridor over past several months. We are introducing Standing Deposit Facility (SDF) to provide symmetry to operating framework of monetary policy. RBI will introduce SDF as floor for the LAF corridor. SDF to have 3.75 percent interest rate. Access to SDF, MSF will be at the discretion of the banks. SDF also a financial management tool to strengthen financial stability, will be 25 bps below the policy rates. Width of the LAF corridor restored to the pre-pandemic level of 50 bps. Financial markets regulated by central bank to now open at pre-pandemic time of 9 am.
SDF, MSF will be available from 5:30 pm till midnight all days of the week. Money market opening time restore to 9:00 am, which is the pre-pandemic time. Gradual, calibrated withdrawl of liquidity over multi-year time frame, in a non-disruptive manner beginning this year. Will deploy various instruments as warranted to help the government complete its FY23 market borrowing programme. RBI expects CAD to stay at sustainable levels which can be financed with normal capital flows. Remain committed to maintaining orderly conditions in domestic financial markets.
Held-to-maturity limit to revert to 22 percent of banks' net demand and time liabilities in FY24.
RBI also proposes panel to review status of customer service at RBI-regulated entities
Cardless cash withdrawal to be made available at all bank branch and ATMs via UPI, to prevent frauds. To secure payment systems, propose guidelines for such operators
BBPS has seen rise in volumes, to encourage this further, propose to reduce networth requirement for such entities to Rs 25 crore vs Rs 100 crore
"Braced to defend the Indian economy. We ar not hostage to any rulebook. No action is off the table when the need is to safeguard the Indian economy. Sky may be overcast, but we will use all our energies to let sunlight shine on India's future. It is the faith, that steers us through stormy seas, moves mountains and jumps across the ocean"
The government 10 year bond yield hit 7%, first time since June 2019, after the Reserve Bank of India raised its annual inflation forecast. The bond yield hit a high of 7.007% -- a level last seen on 13 June 2019 -- up 9 basis points from its previous close of 6.913%. Bond yields and prices move in opposite directions.
The Reserve Bank of India has increased its annual inflation forecast to 5.7% from 4.5% earlier. The RBI also reduced interest rate corridor to 50 basis points. It lowered growth projection to 7.2% from 7.8% earlier. On record borrowing plans this fiscal year, RBI said it will use various instruments to complete government borrowings.
RBI has kept borrowing casts at a record low for an eleventh straight meeting. The MPC voted to keep the benchmark repurchase rate at 4% and retained its accommodative stance. It also said that the country is facing fresh challenges from war in Ukraine and covid lockdowns in China which risk exacerbating a global supply squeeze and price pressures.
Indices flat as RBI maintains ‘accommodative’ stance; GoI 10Y yield rises to 7%, highest since 2019
Among sectors, selling is seen in the IT and pharma names, while power, oil & gas and metal indices up 0.5-1 percent.
RBI MPC voted to keep rates unchanged, stays accommodative
RBI to restore the LAF corridor to 50 bps, pre-pandemic level
FY23 GDP forecast pegged at 7.2%, assuming crude at $100
CPI projected at 5.7% for FY23 vs 4.5% as seen previously
Financial markets prepared for LAF corridor over many months
Gradual withdrawal of liquidity over years, in non-disruptive manner
Money market opening restored to pre-Covid time of 9:00am
Banks can hold 23% of bonds as HTM through March 2023
CAD to stay sustainable, can be financed via normal capital flows
Cardless cash withdrawal at all bank branches and ATMs via UPI
The Monetary Policy Committee (MPC) of the Reserve Bank of India retained the key policy rate, repo, at 4 percent on April 8. The MPC also retained the policy stance as ‘accommodative’ indicating that the rate-setting body is focused on boosting the economic growth. The reverse repo, or the rate at which the central bank borrows short-term funds from banks, has been kept unchanged at 3.35 percent.
India’s consumer price index (CPI) inflation rose to 6.07 percent in February 2022 from 6.01 in January 2022, data released on March 14 showed. It was 5.03 percent in February 2021. The MPC has the mandate to keep the inflation within the 2-6 percent range.