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RBI MPC 2023 latest: This month, the RBI policy meeting was conducted from August 8-10. RBI MPC latest updates: Reserve Bank of India (RBI) governor Shaktikanta Das on Thursday said in the post-monetary policy press conference that incremental CRR for scheduled commercial banks is likely to affect liquidity by slightly more than Rs 1 lakh crore. Das added that the incremental CRR for banks is a temporary measure and will be reviewed on September 8.
Earlier in the day, he announced several measures to boost UPI payments. These included raising the transaction limit on UPI lite from Rs 200 to Rs 500. Das also said that offline payments via UPI will to be introduced soon and that conversational payments will be enabled on the platform.
Earlier in his statement, Das said that the repo rate has been kept unchanged at 6.50 per cent. He added the central bank has also kept the withdrawal of accommodation stance unchanged. Real GDP growth for 2023-24 is projected at 6.5 per cent, with Q1 at 8 per cent, Q2 at 6.5 per cent, Q3 at 6 per cent, and Q4 at 5.7 per cent, Das noted.
Das said that the central bank pegged the CPI inflation for 2023-24 at 5.4 per cent if monsoon remained normal. He added that CPI inflation for Q2 of 2023-24 is projected at 6.2 per cent, Q3 at 5.7 per cent, and Q4 at 5.2 per cent. He also projected the CPI inflation for Q1 of 2024-25 at 5.2 per cent. He further said that India's strong macroeconomic fundamentals have led to strong growth.
Also Read: RBI MPC meet: RBI raises inflation projection for FY24 to 5.4%
Commenting on inflation trends, he said that a spike in tomato prices and rise in cereal, pulses contributed to inflation. He also noted that vegetable prices may see significant correction.
Das further noted that India is contributing around 15 per cent to the global growth, while adding banks remain the healthiest in over a decade. This month, the RBI policy meeting was conducted from August 8-10.
Also Read: RBI MPC meet in August: RBI keeps repo rate unchanged at 6.50%
Here are the latest updates from the RBI MPC meeting 2023 at BusinessToday.In:
Bankbazaar.com CEO Adhil Shetty says, "For FD investors, this is the best time to park their funds at higher interest rate FDs as some of the banks of already begun decreasing their interest on FDs. Lock in your FDs at interest rates higher than 7 or 8 per cent will give good corpus to senior citizens who earn .50 basis points higher interest than others. The best-paying tenors are seen to be between 1 and 3 years."
Madhavi Arora, Lead Economist, Emkay Global Financial Services said, "Imposition of Incremental CRR (ICRR) of 10% on NDTL (for period of May 19 to July 28 ) would imply a temporary liquidity depletion of ~Rs1.15tn/Rs996bn (ex of HDFC twin merger). This assumes an effective CRR of 14.5% for the period concerned (4.5%+10%). However, if we assume the ICRR of 10% to include the existing CRR of 4.5%, the liquidity depletion would amount to Rs 650bn/Rs548 bn ex of HDFC twin merger".
“The stock market was taken by surprise by RBI’s action to remove excess liquidity from the system, due to the influx of Rs 2000 bank notes, among other factors. RBI has introduced Incremental CRR (ICRR), to impound the effect of excess liquidity. This incremental CRR would be 10% of the increase of NDTL from 19th May to 28th July, which is INR 8tn and the impact of which could be around Rs1tn, from the banking system. The RBI maintained that there would still be adequate liquidity even after this move and however the existing CRR remains unchanged," Amar Ambani, Group President & Head - Institutional Equities, Yes Securities.
Madhavi Arora, Lead Economist, Emkay Global Financial Services, said: "The immediate impact of RBI absorbing liquidity via ICRR will be mild hardening of money market rates for borrowers including NBFCs/corporates, while for banks as well there will be slight impact on their NIMs (3-4 bps) depending on the instruments where they were parking the money (assuming 14.5% effective CRR)."
RBI Deputy Governor Dr MD Patra said that El Nino is not as dangerous for India as it is for South America. He added that despite this, we need to keep our guard on as it could impact the later monsoon season.
"September 8 review of incremental CRR for banks will depend on conditions prevailing at the time. So I don’t want to pre-judge what the review will say. The review can happen even before September 8," Das said. He, however, mentioned that this is a temporary measure.
While responding to a reporter's question on the exact amount of incremental CRR, RBI governor Shaktikanta Das said the incremental CRR for scheduled banks will affect liquidity by a little above Rs 1 lakh crore.
“In the ever-evolving global arena, our nation's economic strength shines, making a significant 15% contribution to worldwide growth. The MPC's dedication works to harmonise inflation with a 4% objective. Demonstrating prudence, the RBI retains the repo rate at 6.5%, upholding stability while envisioning a steady 6.5% growth for FY'24 despite inherent uncertainties. We hope to see reduction in rates in months to come,” Essar Ports MD and CEO Rajiv Agarwal said.
While replying to a reporter's question on Russian investment in Indian government bonds and T bills, RBI Deputy Governor T Rabi Sankar said that the investment is allowed through the FPI route and the Special Vostro account route. He, however, declined to comment on the quantum of investment by any specific country.
“Incremental CRR hike (~95,000 cr of liquidity suck out) to be temporary in nature to address liquidity addition on account of withdrawal of Rs. 2000 notes. This could dampen short term bond yields in the near term. Bond prices could see relief buying as the mood was quite sombre assuming a very hawkish commentary.”
Lakshmi Iyer, CEO - Investment & Strategy, Kotak Alternate Asset Managers Limited
"The upward revision in the expected level of inflation to 5.4 percent for the full year by RBI, indicates the continued vigil which is required to keep a check on inflationary trends. The target of 4% inflation is still far off and therefore there is no likelihood of any reduction in the repo rate soon. The status quo in the stance of withdrawal of accommodation is also on expected lines given the volatility and the need for supporting growth. Accordingly, the GDP target rates have not been changed," Managing Director at Resurgent India Jyoti Prakash Gadia said.
"Policy is not that hawkish but a couple of factors contributed to the market's decline. Firstly, the decision to maintain an additional 10% of Incremental Cash Reserve Ratio (CRR) for the banks. Additionally, a shift in the inflation forecast from 5.1% to 5.4% could also be influencing the market sentiment negatively," Shrey Jain, Founder and CEO SAS Online.
"It is a cautious wait and watch policy, with macros having turned negative since last announcement in June. Oil prices, food prices have all gone up. Inflation expectations have gone up as well. RBI has imposed additional cash reserve requirement on incremental bank deposits. In July CPI headline reading will go up to close to 6.50%. Next few months would be a good opportunity to add duration to the portfolio with a 12 month investment horizon. It would be difficult for risky assets to perform in face of the headwinds caused by tight monetary and financial conditions," according to Trust Mutual Funds CEO Sandeep Bagla.
"The RBI’s decision to maintain status quo in the repo rates augurs well for the real estate sector. It is important to note that the macro-economic fundamentals of the country are strong and the economy is performing well. The real estate market has seen a strong rebound in in the recent past driven primarily by end-users and we see this up-cycle continuing in 2023. Also, the strong fundamentals for housing demand will keep the momentum upwards for realty sales where buyers are carefully filtering out projects and looking for the right product mix in terms of affordability, accessibility and quality of living. The continuation of existing policy rates and undoubtedly, a further reduction in interest rates in the near future would be preferred to bolster overall market confidence and make it more enticing for home buyers. Moreover, as the festive season approaches, it presents a golden opportunity to reinvigorate the real estate market with reduced interest rates ahead of the festive season. It also has to be kept in view that real estate is considered as the safest bet for investment compared to other instruments. All of this will boost real estate and enhance economic growth in the larger context. Overall, we are optimistic that the government would shape its policy actions to promote demand even further and incentivise people to buy more properties, as the sector is the primary contributor to economic growth," Ramani Sastri, Chairman and MD, Sterling Developers.
" As widely anticipated, the RBI has decided to keep the repo rates unchanged at 6.5%. India continues to outperform other countries in terms of consumption and with the festive season coming up, the RBI will not risk denting it. This is nothing but good news for aspiring homebuyers on the market for a purchase in the near future. The unchanged repo rate will help maintain the momentum in housing sales - particularly in the mid and luxury segments, which did significantly well in H1 2023,"ANAROCK Chairman Anuj Puri said.
- Enable conversational payments on UPI using artificial intelligence (AI)
- Introducing offline payments on UPI using near-field communications
- Transaction limit for UPI lite raised from Rs 200 to Rs 500
Commencing from August 12, banks will be required to uphold an additional Cash Reserve Ratio (CRR) of 10% on the growth in their Net Demand and Time Liabilities (NDTL) between May 19 and July 28, according to the statement made by Governor Shaktikanta Das. It is important to note that the prevailing CRR will remain unaffected.
RBI boss Shaktikanta Das said that the Indian rupee has remained stable since January 2023. He added that India's forex reserves have crossed $600 billion.
RBI governor Shaktikanta Das said that the level of surplus liquidity has gone up due to withdrawal of Rs 2000 banknotes, and dividend to government.
CPI inflation for 2023-24: 5.4%
Q2: 6.2%
Q3: 5.7%
Q4: 5.2%
Q12024-25: 5.2%
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