Lending rates likely to come down: SBI

http://businesstoday.intoday.in/story/rbi-policy-review-lending-rate-sbi/1/191929.html

Borrowers could see better days ahead as banks are expected to cut lending rates following the RBI's decision to cut short term lending rate as well as unlocking Rs 18,000 crore by slashing cash reserve ratio (CRR) by 0.25 per cent.

Soon after the Reserve Bank unveiled its mid-quarter review of the monetary policy, several bankers hinted that they may consider rate cut in their ALCO (Asset Liability Committee) meeting.

RBI Governor D Subbarao in the third quarter monetary policy review surprised the market by cutting short-term lending rate called repo by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by similar margin to 4 per cent, releasing Rs 18,000 crore primary liquidity into the system.

Commenting on RBI's action, SBI Managing Director A Krishna Kumar said "a rate cut is likely. Rates on advances and deposits could come down simultaneously. The RBI's action is positive".

RBI cuts key rates as inflation eases

http://businesstoday.intoday.in/story/rbi-cut-key-rates-as-inflation-eases-loans-to-become-cheaper/1/191919.html

The Reserve Bank of India brought some cheer for the middle class on Tuesday as it cut key rates for the first time in nine months in its monetary policy review. The repo rate was cut by 25 basis points and the cash reserve ratio (CRR) was also reduced by 25 bps. 

Soon after the policy announcement, the 30-share BSE Sensex was trading at 20,098.08, down 5.27 points or 0.03 per cent as 11.17 am. The 50-share Nifty was at the same time was trading at 6094.15, up 19.35 points or 0.32 per cent.

Business Today had in its analysis of the central bank's last monetary policy review predicted that the Reserve Bank would go for a rate cut in January. 

Senior Editor Anand Adhikari had said: "It is clear that there will be a softening of interest rates only from January, going by the RBI's guidance in October this year. The central bank says that headline inflation has been below the RBI's projected levels in the last two months...It is clear that there will be a softening of interest rates only from January, going by the RBI's guidance in October this year. The central bank says that headline inflation has been below the RBI's projected levels in the last two months."

Highlights:

1. Repo rate now stands at 7.75 per cent
2. CRR now stands at 4 per cent
3. Moderation in inlfation has given way for reducing key rates
4. Inflation target to 6.8 per cent for Mar 2013
5. CRR cut to infuse Rs 18,000 crore of liquidity in the system
6. RBI to work in conjunction with fiscal steps
7. Policy action guidance to support growth
8. INflation likely to remain range bound at current level
9. Lowering CRR last year didin't give us the desired result 
10. Policy to provide rate environment for growth
11. Large fiscal deficit to crowd out private investment
12. Bank rate stands adjusted 8.75 per cent
13. RBI trims 2012-13 growth estimate to 5.5 per cent from 5.8 per cent
14. RBI says inflation has come off its peak
15. Q3 CAD likely to widen beyond 5.4 pc of GDP.
16. Next mid-quarter review of monetary policy on March 19.

Ahead of policy review, RBI says liquidity position comfortable

http://businesstoday.intoday.in/story/policy-review-on-sept-17-liquidity-position-comfortable-rbi/1/187939.html

The Reserve Bank of India (RBI) has said the liquidity situation currently is comfortable and indicated that monetary policy action in the mid-quarterly review next week would depend on latest developments in the money market.

The central bank, in its mid-quarterly review of monetary policy to be announced on September 17, is expected to take steps to promote growth and also contain inflationary expectations. 

"For the last several weeks, liquidity levels have been within our comfort zone... (but) we monitor this on a daily basis", RBI Deputy Governor Subir Gokarn told reporters on the sidelines of a function.

RBI, he added, would take note of emergence of "signs of stress, particularly if they are likely to be persistent. We will take that into account...we have for quite some time realised there was stress in the market both in terms of quantity of LAF (Liquidity Adjustment Facility) borrowings and in terms of the behaviour of the call rate which is the number we look at. There are no signs of stress at the moment".

In the forthcoming review, RBI is expected to respond to some bankers' demand for abolition of Cash Reserve Ratio (CRR) - the amount of money which banks are required to keep with the central bank in cash.

Highlights of First Quarter Review of Monetary Policy 2012-13

http://www.thehindubusinessline.com/industry-and-economy/banking/article3706968.ece

Highlights of the ‘First Quarter Review of Monetary Policy 2012-13’, announced by the RBI today:

* RBI leaves key interest rate unchanged

* Statutory Liquidity Ratio (SLR) cut to 23% (from 24%)

* Growth projection lowered to 6.5%, from 7.3%

* March-end inflation pegged at 7%, up from 6.5%

* Containing inflation remains main focus

* Situation in the euro area continues to cause concern

* CAD, fiscal deficit pose risk to economic stability

* Asks government to cut fertiliser and fuel subsidy

* Open market operations to continue to inject liquidity

* Mid-Quarter Review of Monetary Policy on September 17

* Second Quarter policy review on October 30