We are sensitive to cash requirements ahead of festival season, says RBI Governor Shaktikanta Das

“RBI’s decision to keep the repo rates unchanged at 6.5% for the third time in a row, is positive news for the real estate industry. The home buyer sentiment has been strong thus far in 2023, and the stability in rates will help keep up this momentum. Factors like attractive government incentives, increased urbanization, rising disposable income and post-pandemic pent-up demand have resulted in a rise in the appetite for housing units in India.

Looking ahead, the housing finance industry will benefit from this buoyancy and continue to capitalize on this opportunity by offering a variety of home loan products at competitive rates to potential homebuyers.

“RBI’s decision to maintain the status quo on the policy rate was on the expected lines. However, it sounded more cautious than the last two meetings, with a significant upward revision in the inflation numbers for the upcoming quarters. With the steep upward revision in the inflation projections, the expectation of a rate cut is pushed further to the next fiscal. Additionally, the announcement of a temporary provision of incremental CRR will help remove the build-up of excess liquidity in the system”

Quick impact of Incremental CRR

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).

That said, some banks (PSBs specifically) benefitted more than others from the liquidity glut due to Rs2K notes withdrawal, while others toiled to get deposits by increasing rates.

However, all the banks will have to maintain ICRR and thus could be construed as unfair to some banks who did not benefit much from the Rs 2000 notes withdrawal (mainly PVBs).

Banks right to recover written off loans has not diminished in any manner, says Dy Guv Swaminathan. Would like to see better recoveries from banks, he added. He further said that writeoffs should be seen in the context of age of NPAs.

If food inflation gets generalised, we will have to act, says RBI Governor Shaktikanta Das. By and large transmission within this TOP (tomato, onion and potatoes) group tends to get generalised, he added.

El Nino not as dangerous for us as South America, will continue to remain watchful, says RBI Dy Governor Patra. Rice growing regions of North and East India have not received enough rainfall but that is correcting now, he added.

RBI Monetary Policy Live updates: We have various liquidity options, ICRR best at this juncture, says RBI Governor Shaktikanta Das. Currency in circulation usually picks up ahead of festival season, he added.

He further said that we will ensure there is enough liquidity in the system for banks to continue lending.

We are seeing signs of revival in rural economy, says RBI Dy Governor Michael Patra. According to FMCG companies rural sales are improving

We are not unduly concerned about the balances in vostro accounts, says RBI Governor Shaktikanta Das. What is held in the Vostro accounts is part of the banking system, he added.

He further said that we are not unduly concerned about outflows from the vostro accounts. With $600 bn reserves, we are far better placed to deal with any situation.

4.3% is a comfortable level for inflation. There have been shocks which were unanticipated. May CPI was aligned with inflation target, says Dy Guv Patra

• Liquidity amounting to a little above Rs 1 lakh crore crore will get impounded due to incremental cash reserve ratio
• ICRR applicable to all scheduled banks
• Review of ICRR will depend on GST payments and credit offtake
• we are always nimble in our liquidity actions

UPI has become internationally recognised widely as efficient and payment system, RBI Governor Shaktikanta Das.

Discussions underway with a few other countries, including some advanced countries, to link UPI with their system, he added.

RBI Monetary Policy Live updates: On UPI linkage with other countries payment systems, RBI Governor Shaktikanta Das said that we have already done with Singapore and MoU with UAE has been signed and it is a work in progress

ICRR was necessary in the light of liquidity overhang, says RBI Governor Shaktikanta Das. The Reserve Bank of India (RBI) has asked banks to maintain an incremental Cash Reserve Ratio (ICRR) of 10 per cent on the increase in their deposits between May 19 and July 28 to suck out excess liquidity in the banking system.

There will be enough liquidity left with banking system after ICRR, the Governor has observed.