YES Bank resolution will be swift, 30 days is an outer limit: RBI governor

The RBI governor also said that the impact of Covid-19 on India will be limited

Speaking on the move to take control of YES Bank, Reserve Bank of India's (RBI) Governor, Shaktikanta Das said, "The decision is taken at a 'larger level', not at individual entity level, the move is aimed at ensuring safety of financial system." The governor expressed confidence that the YES Bank resolution will be done very swiftly and 30 days has been set as the outer limit. The RBI governor also said that the impact of Covid-19 on India will be limited, but cautioned that certain sectors which depend on China will be impacted due to the epidemic and the mitigatory steps are being taken.

"Impact on India will be limited as the economy is not too integrated with global value chain; and to that extent, we will be insulated," he said. The RBI governor added that global growth may slow down as Covid-19 spreads rapidly. Shaktikanta Das expressed confidence that all central banks will be resolved to work in close coordination. The governor had stated that RBI stands ready to intervene in whatever way required to respond to epidemic challenges.

The coronavirus (Covid-19) outbreak has now spread to more than 78 countries — from South Korea to Italy, Iran, Japan and the United States. At least 11 people have died of Covid-19 in the US while UK reported its first death. A total of 97,873 cases have been reported worldwide and 3,382 people have died of the virus. However, according to reports of the total cases 54,121 cases have recovered from the infection.

Coronavirus outbreak to have limited impact on India, says RBI Governor

Only a couple of sectors in India are likely to see some disruptions but alternatives are being explored to overcome those issues, he said

The coronavirus outbreak will have a limited impact on India but the global GDP and trade will definitely get affected due to the large size of the Chinese economy, RBI Governor Shaktikanta Das has said. Only a couple of sectors in India are likely to see some disruptions but alternatives are being explored to overcome those issues, he said.

The deadly coronavirus has brought a large part of the world’s second-largest economy China to a standstill and its impact has been felt across industries. India’s pharmaceutical and electronic manufacturing sectors are dependent on China for inputs and they may be impacted, Das told PTI in an interview here. “It is definitely an issue which needs to be closely monitored by every policymaker whether in India or any other country. Every policymaker, every monetary authority needs to keep a very close watch. So coronavirus issue needs to be closely watched,” he said.

A similar problem, perhaps on a lower scale, occurred last time during the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, he said adding that the Chinese economy had slowed down by about 1 per cent during that time. At the time of SARS outbreak, China was the sixth-largest economy and accounted for only 4.2 per cent of the world’s GDP. While, the Asian giant is now the world’s second-largest economy, accounting for 16.3 per cent of the global GDP, therefore, any slowdown in the Chinese economy would impact the global economy…

Monetary policy review: Another rate cut may not help Indian economy

The larger problem here is that government finances are already in a hole; that would be a problem even if the tax cut were the best-designed in history

It’s almost universally expected in India that the central bank’s monetary policy committee will lower interest rates this week. Many expect it to keep cutting until the policy rate hits 5 per cent by the end of the year; it was 6 per cent in June, and the committee cut it by an unexpected 0.35 percentage points in its last meeting to bring it down to 5.4 per cent. The arguments for a cut are manifold: The Indian economy is clearly spluttering, with growth coming in at a shocking 5 per cent in the last quarter for which data is available; consumer price inflation stands at 3.2 per cent, well below the Reserve Bank of India’s mid-point target of 4 per cent; and industry is loudly complaining that high real rates are depressing investment.

Even the hawkish monetary policy committee, which critics complain has consistently over-estimated inflation in the past, is unlikely to be able to ignore that combination of factors. Reserve Bank of India Governor Shaktikanta Das told the Bloomberg India Economic Forum last month that “there’s room for a rate cut, especially when growth has slowed down.” The bond market has already been given reason to cheer this week, after the government kept its target for borrowing in the second half of the financial year constant, at Rs. 2.7 trillion.

But the RBI would be wise to be cautious. The government in New Delhi won reelection in May by throwing money at the electorate, particularly rural voters. More recently, panicked by the sharp slowdown in growth, it has responded with fiscal measures that are likely to stress its finances, including a big cut in corporate income tax rates last month (though the eventual fiscal stress of that cut might be less than originally feared, given that exemptions are also being phased out)….

RBI cuts repo rate by 25 bps to 5.75%, changes stance to accommodative

According to a Bloomberg Survey, 31 of 43 economists had projected 25 basis point rate cut while three penciled in a 50 basis points cut.

The monetary policy committee (MPC) of the Reserve Bank of India (RBI) on Thursday reduced the repo rate by 25 basis points (bps) to 5.75 per cent in the second bi-monthly monetary policy meet of the financial year 2019-20 (FY20), that concluded on Thursday. It was a third straight interest rate cut by the RBI. Repo rate is the rate at which the RBI lends money to the commercial banks, in case of any shortfall of funds. Consequently, reverse repo rate now stands at 5.50 per cent. The stance of the policy was also changed to ‘accommodative’ from ‘neutral’.

All members of the MPC (Dr. Chetan Ghate, Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra, Dr. Viral V. Acharya and Shri Shaktikanta Das) unanimously decided to reduce the policy repo rate and change the stance of monetary policy from neutral to accommodative.

GDP forecast revised downward

The central bank also lowered its growth forecast for the economy for 2019 – 20. Weak global demand due to escalation in trade wars, the RBI feels, may further impact India’s exports and investment activity. The GDP growth projections for 2019-20 was cut to 7 per cent from 7.2 per cent, forecast in the RBI’s meeting in April 2019. “Taking into consideration the above factors and the impact of recent policy rate cuts, GDP growth for 2019-20 is revised downwards from 7.2 per cent in the April policy to 7.0 per cent – in the range of 6.4-6.7 per cent for H1:2019-20 and 7.2-7.5 per cent for H2 – with risks evenly balanced,” the RBI statement said.

Policy in-line with expectation

The RBI was widely expected to go for an interest rate cut amid dismal gross domestic product (GDP) growth, subdued investment and slowdown in consumption space. Last week, government data showed GDP growth slowed to a five-year low of 5.8 per cent in the fourth quarter (Q4) of FY19. According to a Bloomberg Survey, 31 of 43 economists had projected 25 basis point rate cut while three penciled in a 50 basis points cut. Elara Capital, in its report dated June 1, had said weak growth amid benign CPI inflation is expected to create room for the Monetary Policy Committee to cut the repo rate by 50-75 bps through FY20E, beginning in June 2019…

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