Tag: reserve bank of india

From FT Alphaville April 17, 2012

From FT Alphaville

1. The central bank bashing doesn’t start and end with Bernanke.

Central banks just about everywhere make fantastic political punching bags, and the popularity of this tactic is growing. For example: 

FRANKFURT — As the eurozone crisis shows signs of heating up again, political leaders are once more looking to the European Central Bank for help.

Indeed they are:

François Hollande, the front-running Socialist candidate in the French presidential election, said on Monday the European Central Bank should have intervened “massively” by lending directly to eurozone countries to save Greece and counter the sovereign debt crisis.

This particular election campaign-driven episode was sparked by Nicholas Sarkozy breaking his “no ECB bashing” pact with Angela Merkel over the weekend.

Even Australia’s central bank, whose board could be forgiven for thinking they were showing admirable restraint by “taking away the punch bowl”, is being roundly beaten up by everyone from TV presenters to union leaders to, er, former political advisors for daring to wait for inflation data before deciding on an all-but-certain rate cut.

Which takes us to the next (possible) trend:

Continue reading: “Four trends in central bank-land”

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Posted in Central banks |

RBI doubles its rate-raising pace

May 3, 2011 5:03 pm by Emma Saunders

India’s central bank has upped its campaign against inflation, raising rates by half a percentage point, twice previous rate rises. This is the first half point rate rise since 2008 (see chart).

The move comes despite “signs of moderating growth” in the economy, which shows how worried the Bank is about inflation. Strong consumer demand in the country has aggravated the global issue of rising commodity prices, adding to domestic inflationary pressures. That strong demand, in turn, has probably been encouraged by relatively low rates. Indeed, according to the Bank:

…demand has been strong enough to allow significant pass-through of input price increases.  Importantly, this is happening even as there are visible signs of moderating growth, particularly in capital goods production and investment spending, suggesting that cumulative monetary actions are beginning to have an impact on demand [emphasis ours]

Continue reading: “RBI doubles its rate-raising pace”

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Posted in Reserve Bank of India |

India raises rates to tackle inflation

March 17, 2011 9:52 am by Emma Saunders

High and rising inflation has prompted a quarter point rate rise from the Reserve Bank of India, effective immediately. The move was largely expected. Both the repo and reverse repo rates are affected, now standing at 6.75 and 5.75 per cent, respectively.

Annual inflation rose to 8.31 per cent in February, against a target of 4-4.5 per cent. “The underlying inflationary pressures have accentuated, even as risks to growth are emerging,” said the Bank in a statement. “Risks to inflation remain clearly on the upside.”

In addition to food and energy related price pressure, inflationary risks are heightened by growing demand.

Continue reading: “India raises rates to tackle inflation”

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Posted in Reserve Bank of India |

India raises rates but extends bank liquidity

January 25, 2011 12:15 pm by Emma Saunders

India historical interest rate graphicIndia’s Reserve Bank has raised rates to tackle inflation, while extending bank liquidity measures due to expire next week. The repo and reverse repo rates stand 25bp higher at 6.5 and 5.5 per cent, respectively, while easing measures are extended to April 8.

Indian wholesale price inflation historical seriesThe rate rise was prompted by recent price rises. “Inflationary tendencies are clearly visible,” said governor Duvvuri Subbarao in the statement. “Inflation is the dominant concern… the reversal in [its] direction is striking.” The strength of his words make a 25bp rate rise seem insignificant.

But given global inflationary pressures from food and fuel, India’s December figure was not so dramatic. Viewed historically, annual wholesale price rises of 8.4 per cent still fit into the downward trend seen since April of last year, when inflation was running at 11 per cent. It is too early to say whether December’s figure is the start of a sharp increase in inflation – and today’s decision should make that a little less likely.

Despite the tightening measure, the RBI also announced today that it would alter and extend easing measures

Continue reading: “India raises rates but extends bank liquidity”

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Posted in Reserve Bank of India |

India holds rates and injects liquidity

December 16, 2010 10:48 am by Emma Saunders

Liquidity measures are given their own paragraph in today’s monetary policy announcement from the Reserve Bank of India, as tempering inflation allowed the central bank to hold rates. The (temporary) end to the Bank’s rate normalisation programme was expected after the governor gave a strong hint last month.

“The extent of [liquidity] tightness has been beyond the comfort level of the Reserve Bank,” said the statement, which announced two liquidity injection measures. There has been a cash crunch in the banking sector since at least early November, when the RBI extended temporary easing measures.

The first measure, which has been used temporarily before, is to reduce the amount banks have to keep with the central bank. The statutory liquidity ratio will be permanently reduced from 25 to 24 per cent with effect from December 18. The last time this was done, one estimate equated the reduction to an additional 45,000 crore Rs ($10bn) liquidity.

The second measure

Continue reading: “India holds rates and injects liquidity”

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Posted in Reserve Bank of India |

India extends temporary easing measures

November 1, 2010 12:00 pm by Emma Saunders

Temporary measures designed to ease a cash crunch in the banking sector over the weekend have been extended to run till Thursday. Additional liquidity will be provided to banks through an extra daily auction, since the Bank’s “liquidity adjustment facility window … has been in … deficit … recent[ly]“. Extra auctions were initially set for October 29, 30 and November 1. Now, auctions will also take place on November 2, 3 and 4.

Banks can also avail themselves of a temporary reduction in the statutory liquidity ratio: they will be allowed to hold 24 per cent rather than 25 per cent with the central bank. By one estimate, this small reduction is equivalent to an additional $10bn liquidity.

With the bank offering easing measures, a rate hike on Tuesday is less likely, which would bring to a halt – for now – a series of rate rises since the Spring.

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Posted in Reserve Bank of India |

No sacred cows for RBI working group

October 5, 2010 2:09 pm by Emma Saunders

India’s Bank rate, standing facilities and Liquidity Adjustment Facility – in short, the key tools the Bank uses to transmit its policy decisions to the real economy – are to be examined and compared with processes at major central banks by a special team at the RBI. Suggestions for changes are expected in three months’ time from the newly constituted Working Group on Operating Procedure of Monetary Policy, the Bank said.

The system of daily auctions, which absorb or inject liquidity – the Liquidity Adjustment Facility, or LAF – will come under particular scrutiny. Here there are no sacred cows: the group will examine the frequency and timing of auctions; the maturity period of the repos and reverse repos used to inject/absorb liquidity; and the size of the gap between the repo and reverse repo rates (the “corridor”). Indeed, the group should consider whether there should be a corridor at all. If so, it should consider whether its width be fixed or variable; and how to optimise its efficiency.

The working group consists of 10 people: six from the RBI; three representing the banking industry; and one academic. A similar exercise was carried out in 2003-4. The statement did not say what prompted the move.

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Posted in Reserve Bank of India |

India raises key rates, reserve ratio 25bp

April 20, 2010 8:52 am by Emma Saunders

The Reserve Bank of India has raised rates for the second consecutive month, but by less than some economists had forecast. The repo rate now stands at 5.25 per cent and the reverse repo is up to 3.75 per cent: both changes are immediate. The central bank has also increased the amount of cash its banks have to hold with the central bank, relative to deposits – its cash reserve ratio – by 25bp to 6 per cent. This will be effective April 24. The last rise was a month ago, a 25bp increase decided at an unscheduled meeting of the board. High inflation is the main motivation behind the rises.

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Posted in Uncategorized |

Indian programmers suffer under Paypal suspension

February 11, 2010 10:13 am by Emma Saunders

The Indian central bank has asked Paypal to suspend some cash transfers to and from the subcontinent, leaving thousands of small companies without an income.

The Reserve Bank of India said yesterday that Paypal was not properly registered, following a change to the law in 2008. “Providers of cross-border money transfer service need prior authorization from the Reserve Bank under the Payment and Settlement Systems Act,” a spokeswoman told the NYT. “PayPal does not have our authorization.” The problems may take months to solve.

Paypal said on February 6 that “personal” payments, or those made from one individual to another, had been suspended to India. People and companies in India can still receive “commercial” payments for goods and services, but they are unable to move money from PayPal into their bank.

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Posted in Uncategorized |

India increases reserves burden on banks

January 29, 2010 1:55 pm by FT writers

By James Lamont, South Asia Bureau chief

India’s central bank took steps on Friday to exit the loose monetary policy it adopted during the global financial crisis, as it tried to steady inflation expectations without hurting a quickening recovery.

The Reserve Bank of India announced a 75 basis point rise in the cash reserve ratio, the proportion of deposits that banks must keep with the central bank, to 5.75 per cent, to soak up excess liquidity.

The RBI left the repo rate, a key lending rate, unchanged at 4.75 per cent. Continue reading.

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Posted in Uncategorized |
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