RBI cuts repo rate for fourth time this year — by surprise 35 bps now

The Reserve Bank of India Wednesday announced a fourth consecutive rate cut in key policy rates, but this time by 35 basis points, to revive flagging growth. The committee has cut repo rates by 25 basis points each in the previous three successive monetary policy meetings in February, April and June. The repo rate now stands at 5.4 per cent. With this, beginning February, the six-member monetary policy committee has cut key policy rates by a total of 1.1 percentage [...]

RBI to allow 24×7 money transfer facility under NEFT from December

The RBI has decided to allow round-the-clock fund transfers through NEFT from December this year in order to promote digital transactions. The decision, the Reserve Bank of India said, “is expected to revolutionise the retail payments system of the country”. Currently, the National Electronic Funds Transfer (NEFT) operated by the RBI as a retail payment system is available for customers from 8 am to 7 pm on all working days with the exception of second and fourth Saturdays of a [...]

RBI governor Das says economy in a ‘cyclical and not structural’ slowdown

Reserve Bank governor Shaktikanta Das Wednesday said the economy is in the midst of a cyclical slowdown and not a structural one, and exuded confidence of growth reviving soon on the back of cheaper money and likely more government measures. He expressed confidence that the government will come up with more measures to revive the sagging growth, which dipped to a five-year low of 5.8 percent for the March quarter and is widely expected to slip further in the June [...]

RBI fix for slowing consumption demand — incentives to banks for retail lending

The unconventional 35 basis-point rate cut isn’t the only thing the Reserve Bank of India is depending on to boost credit flow to the economy. RBI Governor Shaktikanta Das has also announced steps to incentivise banks to step up retail lending — a key factor that could push up consumption demand in the economy, which is facing a massive slowdown. Between February and June, RBI announced three rate cuts amounting to 75 basis points, but banks reduced lending rates by [...]

Budget 2019 will boost growth only if Modi govt is friendly towards business and profits

Finance Minister Nirmala Sitharaman tried to give investment a push with a series of small measures in her maiden budget. Whether these steps are successful in pushing India’s corporate sector to invest more will depend on whether the budget inspires enough confidence that the government is indeed as friendly towards business and profits as Sitharaman said in her speech. In the context of the macro-economy, pushing up investment when the savings rate is falling required larger capital inflows. This was [...]

RBI Act needs to be amended to remove ambiguity on surplus flows to govt

The Bimal Jalan Committee is reported to be finalising the framework to calculate the surpluses and reserves the Reserve Bank of India (RBI) should transfer to the government. The present legal framework allows the RBI to choose what proportion of reserves it transfers. As a consequence, it has built up reserves higher than what most other central banks hold. The role of a central bank is different from that of a commercial bank. It issues money on behalf of the [...]

Modi’s anti-poverty schemes work. That’s why BJP swept the Lok Sabha elections

In recent years, the definition of poverty has moved away from calorie-based measurements and monetary values to those that take basic needs into account. This has led to new measures of poverty beyond the ‘below poverty line’ or World Bank ‘dollar a day’ standard. One such measure, published in the Global Multidimensional Poverty report, which goes beyond consumption and expenditure of the household, is a Multidimensional Poverty measure. It includes three key variables — health, education and standard of living. [...]

How govt of India and RBI can manage the risk of foreign currency borrowing

In the past, India has undertaken expensive foreign currency-denominated borrowing from NRIs through Resurgent India Bonds, India Millennium Deposit bonds and dollar-denominated deposits. This time, the government is proposing to issue a small sovereign bond. The risk is small, considering the size of the borrowing, the inflation-targeting monetary policy framework and the fiscal responsibility law. The government and the Reserve Bank of India need to primarily manage risk through sticking to the Fiscal Responsibility and Budget Management Act and inflation-targeting [...]