The Reserve Bank of India (RBI) is likely to cut repo and reverse repo rates on Saturday. However, a CRR cut, sources added, is unlikely. External commercial borrowings (ECB) norms could be eased further too, they said, adding that the RBI is also likely to ask banks to cut deposit rates.
The government, sources said, is expected to announce a fiscal package for the housing, auto and export sectors. Sources added that while the export package would cost the government Rs 2000 crore, an additional budgetary support for the infrastructure could be to the tune of Rs 15,000 crore and there may be a special line of credit for non-banking financial companies, the housing and auto sectors.
Across the board, an excise duty reduction is likely on commercial vehicles, sources said. The government export target for FY09 is likely to be around USD 175 billion, they added.
Disclaimer: Not confirmed news.. only the info to the news agencies
Showing posts with label RBI. Show all posts
Showing posts with label RBI. Show all posts
Thursday, December 4, 2008
Saturday, November 1, 2008
RBI cuts rates to ease cash squeeze, support growth
The Reserve Bank of India (RBI) on Saturday unexpectedly cut its main short-term lending rate for the second time in as many weeks to ease a growing cash squeeze, spur faltering economic growth and fend off damage from the global financial crisis.
Analysts said the surprise RBI move, coming just a week after it left rates unchanged at a policy review, showed its concern that strains on Asia's third-largest economy were quickly becoming more severe.
"These actions were necessary (and had) to be taken on the liquidity front. And with call rates above 20 percent the situation was getting worse," said Vikas Agarwal, strategist at JP Morgan.
"The only question at this point of time which arises is why this was not taken at the time of the policy review last week and the only explanation is they did not anticipate the extent of the liquidity crunch," Agarwal added.
Policymakers around the world have slashed interest rates in recent weeks and injected huge amounts into their banking systems to try to combat the spillover effects of the global financial crisis, which is causing credit markets to freeze up and threatens to plunge the world economy into recession.
Analysts said the surprise move meant concerns over growth and cash tightness overrode inflationary issues but bankers said they would adopt a wait-and-see stance before deciding on lowering their lending and deposit rates.
V. Vaidyanathan, executive director at ICICI Bank the country's second biggest lender told CNBC-TV 18 the move was a welcome step to tide over the cash crunch but it won't rush into interest rate cuts immediately.
The RBI cut the repo rate or its main short-term lending rate by 50 basis points to 7.5 percent and banks' cash reserve requirements by 100 basis points to 5.5 percent.
SLOWING GROWTH
It also cut banks' bond reserve requirements by 1 percentage point to 24 percent of their deposits with effect from November 8, 2008, the central bank said in a notification posted on its website. www.rbi.org.in.
"The global financial turmoil has had knock-on effects on our financial markets; this has reinforced the importance of focusing on preserving financial stability," the central bank said.
The cut in its repo rate will take effect from Nov. 3.
The cut in banks' cash reserve requirements will take effect in two steps -- one from the fortnight beginning Oct 25 and the second from Nov 8 and will release 400 billion rupees ($81 billion) into the banking system.
Piyush Wadhwa, senior vice president, ICICI Securities said the 10-year bond yield could spike up by 5-10 basis points on Monday as result of the central bank move asking lenders to keep less of their deposits in federal debt but yields may ease in the medium term.
On Friday, the 10-year bond yield ended down 1 basis point at 7.50 percent.
India's economy has grown at or above 9 percent for the past three fiscal years, but is expected to grow by less than 8 percent this year as the global slowdown reduces exports. Industrial output grew at an annual rate of just 1.3 percent in August.
Rajeev Malik, economist at Macquarie Securities said the firm was cutting the country's growth estimates for the current year ending in March to 7.2 percent from the previous 7.5 percent due to the global market turmoil.
Overnight cash rates soared to a three-week high of 21 percent on Friday after outflows towards treasury bills drained cash from the system and banks scrambled to arrange funds for a the bond auction which took place earlier in the day.
The RBI move to cut rates on Saturday follows a 100 basis point cut in its main short-term lending rate early last week ahead of its scheduled review on Oct 24.
Analysts said the surprise RBI move, coming just a week after it left rates unchanged at a policy review, showed its concern that strains on Asia's third-largest economy were quickly becoming more severe.
"These actions were necessary (and had) to be taken on the liquidity front. And with call rates above 20 percent the situation was getting worse," said Vikas Agarwal, strategist at JP Morgan.
"The only question at this point of time which arises is why this was not taken at the time of the policy review last week and the only explanation is they did not anticipate the extent of the liquidity crunch," Agarwal added.
Policymakers around the world have slashed interest rates in recent weeks and injected huge amounts into their banking systems to try to combat the spillover effects of the global financial crisis, which is causing credit markets to freeze up and threatens to plunge the world economy into recession.
Analysts said the surprise move meant concerns over growth and cash tightness overrode inflationary issues but bankers said they would adopt a wait-and-see stance before deciding on lowering their lending and deposit rates.
V. Vaidyanathan, executive director at ICICI Bank the country's second biggest lender told CNBC-TV 18 the move was a welcome step to tide over the cash crunch but it won't rush into interest rate cuts immediately.
The RBI cut the repo rate or its main short-term lending rate by 50 basis points to 7.5 percent and banks' cash reserve requirements by 100 basis points to 5.5 percent.
SLOWING GROWTH
It also cut banks' bond reserve requirements by 1 percentage point to 24 percent of their deposits with effect from November 8, 2008, the central bank said in a notification posted on its website. www.rbi.org.in.
"The global financial turmoil has had knock-on effects on our financial markets; this has reinforced the importance of focusing on preserving financial stability," the central bank said.
The cut in its repo rate will take effect from Nov. 3.
The cut in banks' cash reserve requirements will take effect in two steps -- one from the fortnight beginning Oct 25 and the second from Nov 8 and will release 400 billion rupees ($81 billion) into the banking system.
Piyush Wadhwa, senior vice president, ICICI Securities said the 10-year bond yield could spike up by 5-10 basis points on Monday as result of the central bank move asking lenders to keep less of their deposits in federal debt but yields may ease in the medium term.
On Friday, the 10-year bond yield ended down 1 basis point at 7.50 percent.
India's economy has grown at or above 9 percent for the past three fiscal years, but is expected to grow by less than 8 percent this year as the global slowdown reduces exports. Industrial output grew at an annual rate of just 1.3 percent in August.
Rajeev Malik, economist at Macquarie Securities said the firm was cutting the country's growth estimates for the current year ending in March to 7.2 percent from the previous 7.5 percent due to the global market turmoil.
Overnight cash rates soared to a three-week high of 21 percent on Friday after outflows towards treasury bills drained cash from the system and banks scrambled to arrange funds for a the bond auction which took place earlier in the day.
The RBI move to cut rates on Saturday follows a 100 basis point cut in its main short-term lending rate early last week ahead of its scheduled review on Oct 24.
Thursday, October 23, 2008
RBI Relaxes ECB Norms For Companies
In an attempt to infuse foreign capital inflow in the country and help corporates raise funds for projects, the government and RBI have relaxed the ECB norms or the norms on overseas borrowing.
According to the new rules notified by the RBI late on Wednesday, from now on, ECBs up to $500 million per borrower per financial year would be permitted for rupee expenditure or foreign currency expenditure for permissible end-uses under the automatic route. The norm of a minimum average maturity period of seven years for ECBs of more than $100 million for rupee capital expenditure by borrowers in the infrastructure sector has been dispensed with.
However, owing to the tight liquidity situation in the international markets, RBI has raised the ceiling of interest rates at which firms can borrow funds from abroad.
Further, in an attempt to provide a boost to the telecom sector, payment for obtaining license/permit for 3G Spectrum will be considered an eligible end - use for the purpose of ECB.
Till present, ECB proceeds were required to be parked overseas until actual expenditure takes place. Now, companies can either keep these funds offshore or keep it with the overseas branches or subsidiaries of Indian banks abroad or to remit these funds to India for credit to their rupee accounts with banks in India until it is used.
However, the norms clearly specify that these rupee funds will not be permitted to be used for investment in capital markets, real estate or for inter-corporate lending.
Other earlier restrictions including the $500-million limit per company per financial year under the automatic route as well as conditions relating to eligible borrower, recognised lender, end-use, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.
It was only recently that the government widened the ECB window for infrastructure companies, allowing them to bring in $500m to meet rupee expenditure as against $100m previously. Also, the government revised the scope of infrastructure to include sectors like manufacturing, construction and mining in it.
These measures taken by the government will help corporates raise funds from the overseas market in wake of a global credit crunch and plummeting stock markets. It will encourage foreign exchange debt into India, as equity investing both by ways of private equity and tapping the capital markets hit a snag. Meanwhile, the RBI may further relax its monetary stance on Friday , when it undertakes a mid-year review of its annual policy.
According to the new rules notified by the RBI late on Wednesday, from now on, ECBs up to $500 million per borrower per financial year would be permitted for rupee expenditure or foreign currency expenditure for permissible end-uses under the automatic route. The norm of a minimum average maturity period of seven years for ECBs of more than $100 million for rupee capital expenditure by borrowers in the infrastructure sector has been dispensed with.
However, owing to the tight liquidity situation in the international markets, RBI has raised the ceiling of interest rates at which firms can borrow funds from abroad.
Further, in an attempt to provide a boost to the telecom sector, payment for obtaining license/permit for 3G Spectrum will be considered an eligible end - use for the purpose of ECB.
Till present, ECB proceeds were required to be parked overseas until actual expenditure takes place. Now, companies can either keep these funds offshore or keep it with the overseas branches or subsidiaries of Indian banks abroad or to remit these funds to India for credit to their rupee accounts with banks in India until it is used.
However, the norms clearly specify that these rupee funds will not be permitted to be used for investment in capital markets, real estate or for inter-corporate lending.
Other earlier restrictions including the $500-million limit per company per financial year under the automatic route as well as conditions relating to eligible borrower, recognised lender, end-use, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.
It was only recently that the government widened the ECB window for infrastructure companies, allowing them to bring in $500m to meet rupee expenditure as against $100m previously. Also, the government revised the scope of infrastructure to include sectors like manufacturing, construction and mining in it.
These measures taken by the government will help corporates raise funds from the overseas market in wake of a global credit crunch and plummeting stock markets. It will encourage foreign exchange debt into India, as equity investing both by ways of private equity and tapping the capital markets hit a snag. Meanwhile, the RBI may further relax its monetary stance on Friday , when it undertakes a mid-year review of its annual policy.
Monday, October 6, 2008
RBI cuts CRR by 0.5%
The Reserve Bank of India on Monday cut the Cash Reserve Ratio (CRR) rate by 0.5 per cent to 8.5 per cent.
The central bank's move will infuse Rs 20,000 crore (Rs 200 billion) into the markets.
The RBI said in a statement: 'On a review of the current liquidity situation in the context of global and domestic developments, it has been decided to reduce the Cash Reserve Ratio (CRR) by 50 basis points to 8.5 per cent of net demand and time liabilities (NDTL) from its current level of 9.0 per cent of NDTL.'
'The change will come into effect from the fortnight beginning October 11, 2008. As a result of this reduction in the CRR, an amount of about Rs 20,000 crore would be released into the system. This measure is ad hoc, temporary in nature and will be reviewed on a continuous basis in the light of the evolving liquidity conditions,' the statement added.
'It may be recalled that on September 16, 2008, the Reserve Bank announced several measures to alleviate the pressures on domestic financial markets brought on by external developments in response to the bankruptcy/sell-out/restructuring of some of the world's largest financial institutions,' the statement said.
'Since then, there has been a sharp deterioration in the global financial environment with the number of troubled financial institutions rising, stock markets weakening and money markets strained. Central banks across the world have stepped up their liquidity operations, including coordinated actions, and some have banned/limited short selling of financial stocks,' the RBI said.
'These new developments have impacted domestic money and forex markets with a marked increase in volatility and a sharp squeeze on market liquidity as reflected in the movements in overnight interest rates and the high recourse to the LAF,' the RBI statement said.
The Reserve Bank also said that the 'overall stance of monetary policy in 2008-09 accords high priority to price stability, well-anchored inflation expectations and orderly conditions in financial markets while being conducive to continuation of the growth momentum, as set out in the Annual Policy Statement and reiterated in the First Quarter Review of July 2008. The overriding priority for monetary policy is to eschew any further intensification of inflationary pressures and to firmly anchor inflation expectations.'
The central bank's move will infuse Rs 20,000 crore (Rs 200 billion) into the markets.
The RBI said in a statement: 'On a review of the current liquidity situation in the context of global and domestic developments, it has been decided to reduce the Cash Reserve Ratio (CRR) by 50 basis points to 8.5 per cent of net demand and time liabilities (NDTL) from its current level of 9.0 per cent of NDTL.'
'The change will come into effect from the fortnight beginning October 11, 2008. As a result of this reduction in the CRR, an amount of about Rs 20,000 crore would be released into the system. This measure is ad hoc, temporary in nature and will be reviewed on a continuous basis in the light of the evolving liquidity conditions,' the statement added.
'It may be recalled that on September 16, 2008, the Reserve Bank announced several measures to alleviate the pressures on domestic financial markets brought on by external developments in response to the bankruptcy/sell-out/restructuring of some of the world's largest financial institutions,' the statement said.
'Since then, there has been a sharp deterioration in the global financial environment with the number of troubled financial institutions rising, stock markets weakening and money markets strained. Central banks across the world have stepped up their liquidity operations, including coordinated actions, and some have banned/limited short selling of financial stocks,' the RBI said.
'These new developments have impacted domestic money and forex markets with a marked increase in volatility and a sharp squeeze on market liquidity as reflected in the movements in overnight interest rates and the high recourse to the LAF,' the RBI statement said.
The Reserve Bank also said that the 'overall stance of monetary policy in 2008-09 accords high priority to price stability, well-anchored inflation expectations and orderly conditions in financial markets while being conducive to continuation of the growth momentum, as set out in the Annual Policy Statement and reiterated in the First Quarter Review of July 2008. The overriding priority for monetary policy is to eschew any further intensification of inflationary pressures and to firmly anchor inflation expectations.'
Wednesday, September 24, 2008
RBI seeks data from non-bank finance firms
The Reserve Bank of India (RBI) on Wednesday said non-banking financial companies which are not in business of taking deposits must submit basic business information to the RBI each quarter.
The rule applies to finance companies with an asset size between 500 million rupees and 1 billion rupees, it said.
The first such returns for the quarter ended September 2008 may be submitted by the first week of December, the RBI said in a circular posted on its website
The rule applies to finance companies with an asset size between 500 million rupees and 1 billion rupees, it said.
The first such returns for the quarter ended September 2008 may be submitted by the first week of December, the RBI said in a circular posted on its website
Tuesday, September 23, 2008
Sahara India to sell stake in film, TV unit
Mumbai: Sahara India Financial Corp. Ltd, the country’s largest residuary non-banking finance company (RNBC), will sell its equity stake in Sahara One Media and Entertainment Ltd and use the proceeds to meet investment norms laid down by India’s banking regulator, the Reserve Bank of India, or RBI.
RBI recently directed Sahara not to accept deposits that mature beyond 30 June 2011.
An RNBC is required to invest all its deposits in government bonds, deposits of other commercial banks and corporate bonds with ratings of double A+ (AA+), indicating high safety.
Sahara India is one of the promoters of Sahara One Media and currently holds 16.32% stake in the company. Sahara One Media, which is into the business of television and film production, has a market value of Rs450.30 crore, based on its share price of Rs209 at close of trading on the Bombay Stock Exchange on Monday. This means that Sahara India’s stake is worth Rs73.49 crore.
Shares of the production house hit their lifetime high of Rs820 each on BSE on 10 January. At that price, its stake in the firm would have fetched Sahara India Rs288.33 crore.
Also Read Mint’s earlier coverage of the issue
In a June communication to RBI, days before the regulator banned it from accepting fresh deposits (this ban was subsequently lifted and the RNBC was given a three-year sunset window), Sahara India agreed to sell its equity holding in Sahara One to “bridge the gap in directed investments” in accordance with the norms of the central bank.
In that communication, a copy of which has been reviewed by Mint, Sahara India said it would bridge the gap “through internal accruals and/or by way of sale/mortgage/lien on its fixed assets”.
It assured the central bank that it would reduce the gap of Rs714.81 crore in directed investments to zero by December. “We are committed to make good the gap for the purpose of security for depositors by March 2009,” the firm said.
Abhijet Sarckar, head of corporate communications, Sahara India group, said in an email that, “Sahara India Financial Corp. Ltd proposes to transfer 3,075,000 shares of Sahara One to Sahara India Commercial Corp. Ltd through the BSE (Bombay Stock Exchange) on 26 September and as required under the regulations, information in this regard has been submitted Friday evening to BSE.”
BSE was yet to announce this information on its site till Monday evening.
Sarckar also said that there is no gap in Sahara India’s directed investment. “We would like to draw your attention to the fact sheet published by us wherein it was clearly stated that the value of directed investments held by the company fully covers its liability towards depositors.”
RBI recently directed Sahara not to accept deposits that mature beyond 30 June 2011.
An RNBC is required to invest all its deposits in government bonds, deposits of other commercial banks and corporate bonds with ratings of double A+ (AA+), indicating high safety.
Sahara India is one of the promoters of Sahara One Media and currently holds 16.32% stake in the company. Sahara One Media, which is into the business of television and film production, has a market value of Rs450.30 crore, based on its share price of Rs209 at close of trading on the Bombay Stock Exchange on Monday. This means that Sahara India’s stake is worth Rs73.49 crore.
Shares of the production house hit their lifetime high of Rs820 each on BSE on 10 January. At that price, its stake in the firm would have fetched Sahara India Rs288.33 crore.
Also Read Mint’s earlier coverage of the issue
In a June communication to RBI, days before the regulator banned it from accepting fresh deposits (this ban was subsequently lifted and the RNBC was given a three-year sunset window), Sahara India agreed to sell its equity holding in Sahara One to “bridge the gap in directed investments” in accordance with the norms of the central bank.
In that communication, a copy of which has been reviewed by Mint, Sahara India said it would bridge the gap “through internal accruals and/or by way of sale/mortgage/lien on its fixed assets”.
It assured the central bank that it would reduce the gap of Rs714.81 crore in directed investments to zero by December. “We are committed to make good the gap for the purpose of security for depositors by March 2009,” the firm said.
Abhijet Sarckar, head of corporate communications, Sahara India group, said in an email that, “Sahara India Financial Corp. Ltd proposes to transfer 3,075,000 shares of Sahara One to Sahara India Commercial Corp. Ltd through the BSE (Bombay Stock Exchange) on 26 September and as required under the regulations, information in this regard has been submitted Friday evening to BSE.”
BSE was yet to announce this information on its site till Monday evening.
Sarckar also said that there is no gap in Sahara India’s directed investment. “We would like to draw your attention to the fact sheet published by us wherein it was clearly stated that the value of directed investments held by the company fully covers its liability towards depositors.”
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