RBI Monetary Policy Highlights: RBI Hikes Key Lending Rate By 50 Basis Points To 5.9%

RBI Monetary Policy Highlights: The Reserve Bank of India hiked its key lending rate by 50 basis points to 5.90 per cent.

RBI Monetary Policy Highlights: RBI Hikes Key Lending Rate By 50 Basis Points To 5.9%

RBI Monetary Policy: The Reserve Bank of India hiked its key lending rate by 50 basis points

New Delhi:

The Reserve Bank of India's benchmark repo rate was raised by 50 basis points today, the fourth straight increase in the current cycle, as policymakers extended their battle to tame sustained above-target retail inflation rate.

The monetary policy committee (MPC), comprising of three members from the RBI and three external members, raised the key lending rate or the repo rate to 5.90% with a five out of six majority.

The US Federal Reserve's relentless and aggressive interest rate hikes over recent months have sent the rupee down sharply and prompted most economists to predict another 50 bps increase. The MPC has raised rates by a total 140 bps in the last three meetings, including consecutive 50 bps moves in the last two.

The annual retail inflation rate accelerated to 7% in August, driven by a surge in food prices, and has stayed above the RBI's mandated 2-6% target band for eight consecutive months.

Here are the Highlights of RBI Monetary Policy:

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Sep 30, 2022 14:01 (IST)
Currency Movements Are Not Guiding Factors For Monetary Policy: RBI
Reserve Bank of India Governor Shaktikanta Das on Friday said that currency movements are not the guiding factors for monetary policy decisions.

He said currency management is the domain of RBI and that it will deploy all the appropriate measures on the same.

The Monetary Policy Committee, which decided to go for a rate hike of 0.50 per cent earlier in the day, takes into account domestic factors on inflation and growth while formulating its rates strategy, Das told reporters during the customary post-policy press conference.

Currency Movements Are Not Guiding Factors For Monetary Policy: RBI
Sep 30, 2022 13:54 (IST)
67% Of Decline In Forex Reserves Due To Valuation Changes: RBI Governor

  • Reserve Bank Governor Shaktikanta Das on Friday said 67 per cent of the decline in the foreign exchange reserves since April was due to valuation changes arising from strengthening US dollar and higher American bond yields.
  • The forex reserves, which stood at USD 606.475 billion as on April 2, have declined to USD 537.5 billion as on September 23. It was also the eighth straight week when the reserves declined.

Sep 30, 2022 13:41 (IST)
Regulations For Offline Payment Aggregators To Be At Par With Online: RBI
  • Offline payment aggregators (PAs) who aid in face-to-face transactions at merchant outlets will now come under the regulatory purview of RBI, Governor Shaktikanta Das announced on Friday.
  • "Keeping in view the similar nature of activities undertaken by online and offline PAs, it is proposed to apply the current regulations to offline PAs as well," Mr Das said after announcing the bi-monthly policy review.
  • Mr Das said there will be "convergence on standards of data collection and storage" after the move, meaning that such companies will not be able to store details like those of credit and debit cards of a customer.
  • The Governor said PAs play an important role in the payments ecosystem and hence were brought under regulations in March 2020 and designated as Payment System Operators (PSOs).

Sep 30, 2022 13:21 (IST)
Rupee Rises 12 Paise To 81.61 Against US Dollar After RBI's Rate Hike
The rupee witnessed range-bound movement on Friday and was trading 12 paise higher at 81.61 against the American currency after RBI monetary policy announcement.

At the interbank foreign exchange, the domestic unit opened at 81.60 against the dollar, and witnessed an early high of 81.45 and a low of 81.69.

It was trading at 81.61 against the American currency at noon, registering a gain of 12 paise over its previous close.

Rupee Rises 12 Paise To 81.61 Against US Dollar After RBI's Rate Hike
Sep 30, 2022 12:58 (IST)
RBI Mulling To Adopt "Expected Loss" Approach For Loan Provisioning
Governor Shaktikanta Das on Friday said the Reserve Bank is mulling to adopt the "expected loss" approach for loan provisioning.

At present, the banks follow the "incurred loss" approach, where money is set aside after an asset turns sour.

Mr Das called the proposed transition a "more prudent and forward looking approach", and said that a discussion paper will be released soon for stakeholders to comment on the same.
Sep 30, 2022 12:48 (IST)
Forex Reserve Adequacy Considered While Managing Volatile Rupee: RBI
The Reserve Bank of India's interventions in the foreign exchange markets are to maintain macro economic stability and the adequacy of forex reserves is always kept in mind, Governor Shaktikanta Das said in a policy speech on Friday.

The rupee is a free-floating currency, with a market-driven exchange rate, the governor said, adding that the RBI did not have a fixed exchange rate in mind and intervened only to curb excess volatility.

"The aspect of adequacy of forex reserves is always kept in mind," Mr Das added.
Sep 30, 2022 12:09 (IST)
Nifty, Sensex Reverse Earlier Losses And Gain After RBI's Rate Hike
  • Indian equity benchmarks turned green, reversing losses from earlier in the session after the Reserve Bank of India hiked its key lending rate by 50 points to a three-year high and assured policy action as required, tempering markets' sour sentiment.
  • The BSE Sensex index jumped over 500 points to about 56,913, and the broader NSE Nifty index rose more than 0.7 per cent to around 16,940 points.
  • Power Grid, Kotak Mahindra Bank, UltraTech Cement, HDFC Bank, Reliance Industries, and State Bank of India were among the gainers in the 30-share Sensex pack.
  • However, the backwards companies were Asian Paints, Tata Consultancy Services, Tech Mahindra, Wipro, and HCL Technologies.
Nifty, Sensex Reverse Earlier Losses And Gain After RBI's Rate Hike
Sep 30, 2022 11:49 (IST)
Loans To Get Costlier As RBI Hikes Key Lending Rate To 3-Year High
The Reserve Bank of India hiked its key lending rate by 0.5 per cent to a three-year high of 5.90 per cent, which will weigh heavily on the already stretched budgets of Indian households dealing with a rise in prices of almost every item.

The 50 basis points hike marks the fourth consecutive increase since May 2022. The rate hikes were made necessary by inflationary pressures, the situation in Ukraine, and microeconomic uncertainty in advanced economies from aggressive central bank policies globally. Read more

Loans To Get Costlier As RBI Hikes Key Lending Rate To 3-Year High
 
Sep 30, 2022 11:36 (IST)
RBI To Stop 28-Day Variable Rate Repo, Will Continue With 14-Day Auctions
  • The Reserve Bank of India will stop conducting 28-day variable rate reverse repo (VRRR) auctions, considering the current banking system liquidity conditions, but will continue with 14-day VRRR auctions, the central bank chief said on Friday.
  • "In view of the moderation in surplus liquidity, it has now been decided to merge 28-day VRRR with the 14-day VRRR. Consequently, from now, only 14-day VRRR auction will be conducted," RBI Governor Shaktikanta Das said, while detailing the RBI's monetary policy statement.
  • "Fine-tuning operations of various maturities will be conducted for injection as well as absorption of liquidity as may be necessary from time to time."
  • The banking system liquidity slipped into deficit earlier this month and has largely remained that way since then. It currently stands at a deficit of 187 billion Indian rupees ($2.29 billion).

Sep 30, 2022 11:26 (IST)
RBI Retains Inflation Projection At 6.7% For 2022-23
The Reserve Bank on Friday retained its inflation projection for current fiscal year at 6.7 per cent amid global geopolitical developments triggered by Russia-Ukraine war. Read here

RBI Retains Inflation Projection At 6.7% For 2022-23
Sep 30, 2022 11:08 (IST)
RBI Cuts Growth Forecast To 7% For Current Fiscal
The Reserve Bank of India on Friday slashed the growth projection to 7 per cent for the current fiscal from the earlier forecast of 7.2 per cent, citing aggressive tightening of monetary policies globally and moderation in demand. Read more

RBI Cuts Growth Forecast To 7% For Current Fiscal
Sep 30, 2022 11:02 (IST)
What Economists Said About RBI's 50 Basis Point Rate Hike
The Reserve Bank of India's benchmark repo rate was raised by 50 basis points on Friday, the fourth straight increase in the current cycle, as policymakers extended their battle to tame stubbornly above-target retail inflation rate. Read more
Sep 30, 2022 10:21 (IST)
RBI Hikes Key Lending Rate By 50 Basis Points To 5.90%
The Reserve Bank of India hiked its key lending rate by 50 basis points to 5.90 per cent, driven by elevated inflation, aggressive global central bank policies, and turmoil in financial markets. Read more

RBI Hikes Key Lending Rate By 50 Basis Points To 5.90%
Sep 30, 2022 10:08 (IST)
Just In|  RBI hikes key lending rate by 50 basis points to 5.9%
Sep 30, 2022 10:07 (IST)
Here are the highlights of RBI Governor Shaktikanta Das' address:
  • World in midst of third major shock from aggressive monetary tightening by central banks
  • There is nervousness in financial market, global economy eye of new storm
  • Indian economy continues to be resilient in midst of global turmoil
  • RBI hikes benchmark lending rate by 50 basis points to 5.90 per cent
  • RBI to remain focused on withdrawal of accommodative monetary policy
  • Inflation expected to remain elevated at around 6% in second half of FY23
  • Economic activity in India remains stable
  • Recent correction in global crude oil prices if sustained may provide relief to inflation
  • High frequency data for Q2 indicates economic activities remain resilient, private consumption picking up
  • RBI cuts its economic growth projection for FY23 to 7% from earlier estimate of 7.2%
  • Merchandise exports have been affected due to external factors
  • Inflation projection for FY23 retained at 6.7% for FY23
  • Bank credit has grown at accelerated pace of 16.2%
  • Rupee movement orderly against US dollar; depreciated only 7.4% this year till Sep 28
  • We remain confident of financing our external sector deficit
Sep 30, 2022 09:53 (IST)
Rupee Gains For Second Straight Day As Dollar Off Multi-Year Highs; RBI Eyed
The rupee gained a touch ahead of the Reserve Bank of India's policy decision on Friday, extending its strengthening pattern for the second straight day, driven by the lower-than-expected widening of the country's current account deficit and as the dollar pulled back further from multi-year highs.

Sep 30, 2022 09:34 (IST)
Sensex, Nifty Fall Ahead Of RBI Decision, Extend Losses For Eight Straight Days
Indian equity benchmarks extending their losing streak to eight days in a row, ahead of the Reserve Bank of India's rate decision, as a deep-sell of in global stocks hurt investors driven by central banks' hawkish rhetoric, concerns about a potential global recession, and rising geopolitical risk.

The BSE Sensex index declines 262.73 points to 56,147.23, and the broader NSE Nifty index falls 70.4 points to 16,747.70, mirroring a sea of red in Asian bourses.

Sep 30, 2022 08:54 (IST)
RBI Certain To Raise Rates Today, But By How Much Is The Question
The Reserve Bank of India is all set to hike interest rates again on Friday, but expectations were divided on by how much, with 0.5 per cent the most likely outcome driven by elevated inflation, the US Federal Reserve's aggressive stance, and a weakening rupee to new record lows repeatedly in recent days. Read more

RBI Certain To Raise Rates Today, But By How Much Is The Question
Sep 30, 2022 08:45 (IST)
RBI Heads For Its Third Half-Point Hike As Rupee Slumps To Record Lows
  • India's central bank is expected to increase its policy rate by half a point for the third time in a row as the currency's plunge to a record low this month complicates the battle against inflation.
  • The Reserve Bank of India's six-member monetary policy committee will raise its repurchase rate by 50 basis points to 5.90 per cent, according to 24 of 35 economists surveyed by Bloomberg as of Wednesday. Ten forecast the rate will rise by 35 basis points to 5.75 per cent, while one sees a quarter-point increase.
  • Governor Shaktikanta Das may opt to dial up his hawkish rhetoric on Friday from his tone at the August meeting when he pledged to do "whatever it takes" to cool inflation that has stayed above 6 per cent this year.
RBI Heads For Its Third Half-Point Hike As Rupee Slumps To Record Lows
Sep 30, 2022 08:44 (IST)
Hawkish Fed May Prompt RBI To Deliver A 0.50% Hike
  • Interest rate hikes in the United States and the resultant pressure on the rupee is likely to give the Reserve Bank of India (RBI) reason to deliver a 50-basis-point rate hike on Friday even as it tries to protect a recovery in growth.
  • The RBI's monetary policy committee (MPC) has already hiked the key policy rate by 140 bps since May to 5.4%. Since the last policy meet, retail inflation has risen above 7% again and the rupee has weakened 9.5% on year, with pressure on the currency accelerating after the U.S. Federal Reserve's meeting last week.
  • "Shifts in the global policy environment have weakened sentiment considerably, which has been negative for currencies, complicating the policymakers' inflation fight," said Radhika Rao, senior economist at DBS Bank.
  • "While rate sensitive flows are a small part of overall bond ownership, authorities will be keen to defend against spillover risks from global developments," she added.
  • The spread between Indian and U.S. 10-year bond yields touched a low of 360 basis points last week, its lowest since Sept 2009.
Sep 30, 2022 08:38 (IST)
RBI To Raise Rates Again, But Economists Split On By How Much: Report
  • The Reserve Bank of India is set to raise interest rates again next week with a slim majority of economists in a Reuters poll expecting a half-point hike and some others expecting a smaller 35 basis point rise.
  • There was a wide consensus that the RBI will raise rates at the Sept. 30 meeting, although there were differences over how far it would go with inflation accelerating to 7% and with the rupee weakening.
  • The RBI has lagged many of its global peers, despite inflation sticking above the top end of its target range of 2-6% all year. It has raised rates in three separate moves since May, one of them unscheduled, totalling 140 basis points and taking the key repo rate to 5.40%

  • RBI To Raise Rates Again, But Economists Split On By How Much: Report
Sep 30, 2022 08:13 (IST)
RBI's Panel To Start 3-Day Meet On Wednesday, Another Rate Hike Highly Likely
  • The Reserve Bank's rate-setting panel will start its 3-day deliberations on Wednesday amid expectations of yet another rate hike of 50 basis points to check high inflation, in line with similar actions taken by other major central banks, including the US Fed.
  • Based on the recommendations of the Monetary Policy Committee (MPC), the RBI had effected 50 basis points increase in repo rate each in June and August after raising the short-term lending rate by 40 basis points in an off-cycle decision in May.
RBI's Panel To Start 3-Day Meet On Wednesday, Another Rate Hike Highly Likely
Sep 30, 2022 08:12 (IST)
Better For RBI To Allow Rupee To Depreciate A Bit: SBI Report
It might be better for the Reserve Bank of India (RBI) to allow the rupee to depreciate a bit, letting it find its natural balance, said Soumya Kanti Ghosh in an SBI research report.

Rupee had been holding remarkably well with RBI intervention, however, the markets have performed much better, SBI Group Chief Economic Advisor Soumya Kanti Ghosh said in the research report.

Better For RBI To Allow Rupee To Depreciate A Bit: SBI Report
Sep 30, 2022 08:12 (IST)
RBI May Need To Replenish Forex Reserves As Rupee Falls Further: Report
  • The Reserve Bank of India may need to find ways to replenish its foreign exchange reserves such as encouraging non-resident Indians to deposit more funds, as it looks to stabilise a depreciating rupee, HDFC Bank Chief Economist Abheek Barua said.
  • The Indian currency has weakened 9.5 per cent so far this year, with the central bank defending the rupee via dollar sales that have depleted its forex reserves to $545 billion from the peak of $642 billion a year ago.
  • "The central bank should intervene to ensure that a falling currency does not eclipse India's fundamentals," Mr Barua wrote in a note this week.
  • While there might be some benefits of a depreciated currency in closing the trade gap, the damage to the capital account in terms of reduced confidence of investors will outweigh this benefit, he said.

RBI May Need To Replenish Forex Reserves As Rupee Falls Further: Report
Sep 30, 2022 08:10 (IST)

  • The Reserve Bank of India's rate-setting panel on Wednesday began its three-day deliberations on the next bi-monthly monetary policy amid expectations of at least a 50-basis-point hike in the interest rate to check high inflation.
  • If raised, it will be the fourth consecutive hike in the repo rate -- the short-term rate at which the RBI lends money to banks.
  • Headed by RBI Governor Shaktikanta Das, the Monetary Policy Committee (MPC) is scheduled to announce its decision today.

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