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Tag: RBI Rate Cut

  • Interest Rate Cut Likely Soon? RBI Governor Drops Major Hint | Economy News

    New Delhi: The Reserve Bank of India’s (RBI) Governor Shaktikanta Das on Friday said that interest rate cut at this stage will be ‘premature, and very, very risky’. Speaking at the fireside chat at the India Credit Forum event in Mumbai by Bloomberg, Governor Das warned against any premature interest rate cuts when inflation risk is still there. RBI still maintains a growth forecast of 7.2 per cent for FY25 and expecting the inflation to moderate by November.

    “We are not behind the curve. Indian growth story remains intact. India is poised to grow at 7.2 per cent. Growth is steady and resilient, inflation is moderating with certain risk, so a rate cut at this point will be premature and very, very risky,” Das said

    While inflation is expected to moderate, Governor Das also said that there are ‘significant risks’ to the growth outlook. During the October monetary policy announcement, RBI had maintained the status quo on rate and changed stance to ‘Neutral’ from ‘Withdrawal of Accommodation.’

    “There can be differences of opinion, but the broad expectations of the market are quite aligned with our policies,” he said, countering criticisms that the RBI may be behind the curve in managing the economic outlook.

    He further elaborated on India’s overall economic resilience, highlighting the country’s stable macroeconomic fundamentals and strong confidence from international investors. According to Das, these factors have helped maintain the stability of the Indian rupee, which has depreciated only modestly in response to global market movements.

    He assured that while private credit poses global risks, India’s regulatory framework for non-banking financial companies (NBFCs) ensures stability. Das’s remarks come amid broader discussions about India’s economic momentum, with the nation recently overtaking China in population and maintaining a faster economic growth rate than its neighbour.

    He emphasized that India’s growth story remains intact, even as the country navigates inflationary pressures and global economic challenges. Answering to the question on Private credit, the RBI governor further said that it is posing certain risks to every central bank but there is no danger for India.

    “So far as India is concerned, it’s not a problem at the moment in the sense that private credit in the Indian context is mostly offered by the non-banking financial companies which are regulated by the reserve bank,” he added.

    Reflecting on the RBI’s contributions over the past few years, Das highlighted several key initiatives that have strengthened India’s financial sector. He pointed to the RBI’s proactive stance in regulating the banking sector, stating that the RBI is maintaining a close vigil over the credit markets and taking action whenever necessary.

    The governor underscored the RBI’s role in enhancing the stability of banks, reducing the gap between credit and deposit growth, and supporting the rapid rise of non-banking financial companies (NBFCs), which now account for roughly 30 per cent of India’s credit market.

    Pointing out regarding KYC issues, Das said, “I think there are some complaints about KYC related issues, know your customer related issues and knowing the, you know, knowing the ultimate, the beneficial ownership of investments. Now, this is not something which is our creation, but this is a FATF requirement.”

    KYC norms are essential for ensuring that funds entering India are from legitimate sources, given the complexities of global financial markets. “We get often representations about issues relating to procedural issues, relating to know your customer. That is the KYC-related issues. And that is being addressed not just by us, but also by the securities market regulator, particularly for foreign portfolio investors. It’s more to do with the securities market regulator, the SEBI, which is dealing with it,” he added.

  • RBI Likely To Leave Interest Rates Unchanged | Markets News

    Mumbai: The RBI is expected to leave interest rates unchanged in its monetary policy review as it continues to maintain a balance between pushing for economic growth and keeping inflation in check. The RBI’s Monetary Policy Committee (MPC) meeting being held from June 5 to 7, which is taking stock of the economic situation, is expected to stick to the current 6.5 per cent repo rate.

    The repo rate is the interest rate at which the RBI gives short-term loans to banks to enable them to meet their liquidity requirements. This in turn has an impact on the cost of loans that banks extend to corporates and consumers.

    A cut in interest rates results in more investment and consumption expenditure which spurs economic growth. However, the increased expenditure also pushes up the inflation rate as the aggregate demand for goods and services goes up.

    RBI Governor Shaktikanta Das has stated that the central bank would continue with its disinflationary policy to ensure a stable growth path for the economy. He said food price inflation continues to weigh on the trajectory going ahead.
     
    The RBI had last changed rates in February 2023, when the repo rate was hiked to 6.5 per cent. The RBI raised rates by 2.5 per cent between May 2022 and February 2023 after which they have been kept on hold to support economic growth despite inflationary pressures in the past.

    The country’s annual retail inflation eased to 4.83 per cent in April but is still above the RBI’s medium-term target rate of 4 per cent. The fact that the economy has clocked a robust growth rate of 8.2 per cent for 2023-24 leaves the RBI with headroom to put off an interest rate cut until inflation comes down to its targeted level, according to economists.