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    RBI Monetary Policy Highlights: Governor Shaktikanta Das says inflation remains at uncomfortably high levels

    RBI Monetary Policy Highlights: Governor Shaktikanta Das says inflation remains at uncomfortably high levels

    RBI Monetary Policy Highlights: Governor Shaktikanta Das says inflation remains at uncomfortably high levels
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    Summary

    RBI Monetary Policy Highlights: Reserve Bank of India (RBI) Governor Shaktikanta Das-led Monetary Policy Committee (MPC) on Friday raised the repo rate by 50 basis points (bps) to 5.40 percent in a bid to tame persisting high inflation. Higher interest rates are deemed to suppress demand in the economy, thereby helping to tackle inflation. After RBI's August policy meet decision today, the repo rate is above pre-pandemic levels of 5.15 percent. With this, the overall rate hike in three successive policy meets has now gone to 140 basis points, in line with the global trend of monetary policy tightening to cool off inflation. For India, another bigger worry is the widening trade deficit, owing to higher Brent crude oil prices and a depreciating rupee against the US dollar. A CNBC-TV18 poll of economists and market experts had indicated the RBI to raise the repo rate between 35 basis points (bps) to 50 bps.

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    RBI action to lead to improved, faster resolution to issues faced with CICs by retail borrowers: ICRA's Anil Gupta

    Anil Gupta, Vice President and Co-Group Head-Financial Sector Ratings at ICRA, said credit bureau scores have been highly instrumental in lending decisions and improved access to credit for retail borrowers.

    "The credit availability and the borrowing costs are also influenced by the credit score of the borrowers. With inclusion of CICs in the ombudsman scheme, the retail borrowers could expect an improved, faster, and transparent resolution of their issues faced with the CICs," he adds. 

    Quantum of rate hike on upper end of market expectation: Ajmera Realty CFO 

    Nitin Bavisi, CFO of Ajmera Realty and Infra India, believes the quantum of the rate hike was on the upper end of market expectations. The RBI's move to retain its GDP estimate for the year ending March 2023 illustrates the relatively strong macro fundamentals of the economy compared with advanced economies, he said. 

    "From the current perspective of real estate developers, input costs will continue to receive inflationary pressure in the medium term. Even after taking today’s rate revision into account, revised home loans are still expected to remain marginally lower than pre-pandemic levels which augur well in sustaining the demand momentum for the residential sector," he added. 

    Domestic inflation appears to have peaked out: Indian Bank CEO

    Shanti Lal Jain, MD and CEO of Indian Bank, is of the view that inflation in the country appears to have peaked out. 

    "Through this policy, RBI has brought in several measures to maintain price stability while keeping in mind the objective of growth... It has already started to tighten liquidity in the system along with withdrawal of accommodative stance in a calibrated manner... By enabling the cross border inward bill payment system, the ease and convenience of the NRIs will improve along with forex inflows," he says. 

    Surendra Hiranandani,  Chairman and Managing Director, House of Hiranandani reacts on RBI's Monetary Policy

    "The increase in repo rates will have an effect on interest rates as well as homebuyer attitude. This year has seen a steady increase in home sales, but the ongoing climb in mortgage rates may overwhelm a buyer."

    NRIs can pay now pay for bills in India directly

    The Reserve Bank of India has enabled Non-Resident Indians (NRI) to pay bills in India directly. Now cross-border inward payments. through Bharat Bill payment system (BBPS) has been enabled. Earlier, payments through BBPS were only available to customers in India. READ MORE

    Kalpesh Dave, Head Corporate Planning & Strategy, Star HFL reacts on  today's RBI Monetary Policy.

    “HFCs/NBFCs should brace for higher borrowing costs on new credit lines. The same goes for home loan customers. It makes sense to switch to fixed rate offerings post evaluating the benefits that can be incurred.”

    Adhil Shetty, CEO, BankBazaar.com explains factors home loan borrowers should consider after RBI hikes repo rate by 50 bps

    The question borrowers may ask now is if their home loan rate is too high. One of the ways you as a borrower can evaluate this is by checking the premium you are paying above the repo rate. If you are a prime borrower (credit score over 750, stable income, loan payments on time), you can get home loan offers at a premium of around 250-275 basis points over the repo rate, which is now 5.40. So basis the rates we’ve seen in recent months, the lowest rate at which you can get a home loan now may be in the 7.9 to 8.15 range. 

    The range could be lower or higher depending on who you are and whom you are borrowing from. If you're already in that zone, you may focus on pre-paying and voluntarily paying a higher EMI to control your ballooning interest. If you’re beyond this comfort zone, you may also want to consider a refinance with your own lender or with another one offering you better terms. 

    New borrowers especially need to be careful. They borrowed at rock-bottom rates of 6.50 to 7.50 in the last two years. Their loan tenors may increase substantially as their rates rise. In floating rate loans, EMIs remain constant and it’s normally the tenor that adjusts for the rate change. For example, a Rs. 30 lakh loan at 6.50 for 20 years will have an EMI of Rs. 22,367. But at the same EMI at an 8.00 rate, the tenor increases to 28 years and 6 months. This can interfere with other financial plans such as investing for retirement or children’s education.

    Rajni Thakur, Chief Economist, RBL Bank reacts on RBI MPC decision

    “The markets had broadly priced in 50 bps hikes in Repo rates and any forward guidance would have mattered more than the rate action itself. The policy statement however, stayed away from any explicit forward guidance while remaining consistent on its assessment of growth and inflation trajectory for the economy. Any mention of nature and quantum of intervention, to manage currency faced with huge capital outflows didn’t find a place as well. Nevertheless, given the growth-inflation outlook, further hikes towards 6% terminal repo rate seem imminent, even though the pace of hike will likely be softer going ahead. Continued ‘focus on withdrawal’ indicates further drawdown of excess liquidity as well, in which case, monetary tightening is far from over yet”.

    Madhavi Arora, Emkay Global reacts to RBI MPC decision

    "The tone was balanced and similar to June, aiming to tame inflation and external risks. We maintain that FY23 could see RBI’s policy rates terminating around 5.75%-5.90%, with the central bank showing its intent to keep real rates near the estimated natural rate. The need for terminal rates to go too higher than that seems low to us at this point."

    Amar Ambani, Head - Institutional Equities Head, YES SECURITIES reacts on RBI rate hike

    "We see RBI delivering yet another rate hike, probably a mild one (25bps) in October to ensure that price pressure remains under control before it peaks during Q3 FY23. We see the repo rate peaking around 5.7-6.0%.”

    Home buyer affordability shrinks; developers may adopt mitigating measures, says Shishir Baijal, Chairman and MD, Knight Frank India

    “For the real estate sector specifically, the third subsequent rate rise will mean a deterioration of affordability and may impact the sentiments of home buyers. With the cumulative rate hike until today, assuming complete transmission, a prospective home buyers’ affordability shrinks by around 11% i.e. from an ability of purchasing a house of Rs.1 crore value shrinking to Rs. 89 lacs now. Developers are expected to undertake mitigating measures to soften the blow on homebuyer affordability.”

    There are signs that CPI has peaked, it's expected to moderate in Q4FY23 and Q1FY24. Inflation still remains at uncomfortably high levels, says RBI Governor Shaktikanta Das

    Arun Kumar, Head of Research, FundsIndia reacts on RBI MPC decision

    "We expect the pace and quantum of rate hikes to moderate going forward, led by falling commodity prices, global growth concerns, and easing global supply constraints. In our view, the bond yields, especially in the 3-5 year segment, discount a large part of the expected rate hikes.”

    RBI Governor Shaktikanta Das addresses the media: Key highlights from his interaction

    -Forex reserves remain strong

    -Monetary policy will be calibrated, measured & nimble

    -Inflation remains at 7%

    -Other central banks, today, a 50 bps rate hike is normal

    -Many central bankers are hiking by 75-100 bps too

    -Impact of past rate hikes has been factored into inflation forecast

    Shaktikanta Das: Inflation still remains at uncomfortably high levels

    Addressing the media, RBI Governor Shaktikatna Das said that inflation still remains at uncomfortably high levels and there are some uncertainties or outlook to inflation. The RBI is bringing down excess liquidity in the system and the CAD is expected to remain within manageable limits.

    Indian economy is an island of growth and macroeconomic stability, says RBI Guv Shaktikanta Das

    RBI Governor Shaktikanta Das in a press briefing starts by saying that the Indian economy is an island of growth and macroeconomic stability. There are signs that the CPI has peaked, and it is expected to moderate in Q4FY23 & Q1FY24.

    Sandeep  Bagla, CEO - Trust Mutual Funds reacts on RBI MPC repo rate hike

    "We at TRUST MF, do not feel that it is the end of rate hiking cycle. There are strong and stubborn inflationary impulses in form of commodity prices and wage pressures which will  go way with time and aggressive hikes. Rate hikes could be spread out such that there is minimal impact on debt funds's performance. Outlook for funds maturing up to 3 years is quite good, but the longer end funds could remain volatile for some time."

    RBI MPC repo rate hike decision reaction | Naveen Kulkarni, Chief Investment Officer, Axis Securities

    With credit growth looking up, we believe the banks with a higher share of floating rates and a robust CASA-led deposit franchise should be placed well in this increasing interest rate environment. While the domestic inflationary pressures seem to be easing out gradually, the geopolitical tensions, volatility in global financial markets, and emerging risk of the global recession continue to remain key risks.

    Kharif showing will support rural consumption, say Guv Das

    RBI Governor Shaktikanta Das said, “Looking ahead, a good progress of the southwest monsoon and kharif sowing would support rural consumption. Urban consumption is expected to benefit from the demand for contact-intensive services, better performance of corporates and improving consumer optimism. The increase in capacity utilisation, government’s capex push and large expansion in bank credit should support investment activity. According to our survey, manufacturing firms expect sustained improvement in production volumes and new orders in Q2:2022-23, which is likely to sustain through Q4.”

    Enabling Bharat Bill Payment System (BBPS) to process cross-border inbound bill payments

    The Bharat Bill Payment System (BBPS) is an interoperable platform for standardised bill payments. This has transformed the bill payment experience for users in India. Over 20,000 billers are part of the system, and more than 8 crore transactions are processed on a monthly basis. It is now proposed to enable BBPS to accept cross-border inward bill payments. This will enable Non-Resident Indians (NRIs) to undertake bill payments for utility, education and other such payments on behalf of their families in India. This will greatly benefit the senior citizens in particular.

    Credit info companies will have their own internal ombudsmen system. To set up panel to examine MIBOR benchmark, alternatives, says RBI Governor Shaktikanta Das

    OTHER ADDITIONAL MEASURES RBI GOVERNOR SHAKTIKANTA DAS ANNOUNCED IN HIS SPEECH

    1. Standalone Primary Dealers (PDs)
    Proposed to enable standalone PDs to offer all forex mkt making facilities
    To permit to undertake transactions in offshore rupee overnight index swap mkt with non-residents, others

    2. Managing risks in outsourcing fin svcs
    Draft mater direction on managing risk in outsourcing fin svcs will be issued shortly

    3. Bharat Bill Payments System
    Proposed to enable BBPS to undertake cross border inward bill payments

    4. Credit Information Cos
    Decided to include CIC under framework of integrated ombudsman scheme of RBI
    TO mandate CICs to have their own internal ombudsman framework

    5. Committee for MIBOR benchmark
    Proposed to set up a committee to undertake in-depth examination of issues, incl need to transition to alt benchmark from MIBOR

    RBI MONETARY POLICY | Key Highlights

    #1 Repo Rate Hiked By 50 To 5.40%

    #2 MPC Unanimously Voted For A 50 Bps Repo Hike

    #3 Policy Stance Retained At 'Withdrawal Of Accommodation'

    #4 SDF Stands Adjusted To 5.15% & MSF To 5.65%

    #5 FY23 GDP Forecast Retained At 7.2%

    #6 FY23 CPI Forecast Unchanged At 6.7%

    #7 Q1 FY24 CPI Seen At 5%

    #8 Q1 FY24 GDP At 6.7%

    #9 Will Conduct 2-way Fine-tuning Ops As Warranted

    #10 RBI Used Forex Reserves To Stabilise Rupee

    RBI retains retail inflation forecast at 6.7% for FY23

    The RBI retained its retail inflation forecast for the current financial year at 6.7 percent. In its earlier policy review in June, the central bank had forecast Consumer Price Index (CPI) inflation would average 6.7 percent in 2022-23.

    SBI, ICICI Bank, Tata Motors rise but HDFC, SBI Cards, Maruti fall after RBI's bigger-than-expected rate hike

    Interest rate-sensitive stocks — or stocks from spaces likely to be impacted by changes in interest rates — saw mixed moves after the RBI announced a 50 basis points hike in the COVID-era interest rate.In the banking and financial services pack, stocks such as SBI, ICICI Bank, Kotak Mahindra Bank and Axis Bank rose, but HDFC Bank was flat, and scrips such as HDFC, SBI Cards and IndusInd in the red.

    Catch the latest market updates with CNBCTV18.com's blog

    India's foreign reserves remain 4th largest globally, says Guv Das

    Despite the drawdown of foreign exchange reserves to limit rupee volatility, India’s reserves remain the fourth largest globally: RBI Governor Shaktikanta Das

    RBI Governor Shaktikanta Das ends his speech quoting Mahatma Gandhi: "For me the road to salvation lies through incessant toil in the service of my country and my humanity."

    FY23 CPI inflation forecast assumes price of Indian crude oil basket at $105/barrel: RBI Governor Shaktikanta Das

    In Chart | RBI policy CPI forecast

    RBI Monetary Policy Highlights: Governor Shaktikanta Das says inflation remains at uncomfortably high levels

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