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RBI Governor LIVE: Bankers surprised at timing, quantum of RBI rate hike; see substantial liquidity pullout due to CRR hike
Bankers were taken by surprise by the timing and quantum of the Reserve Bank of India’s (RBI) 40 basis points (bps) repo rate hike on May 4. Veteran banker Uday Kotak called the RBI “courageous”. “It was pretty clear that the wolf of inflation is getting more entrenched. There was a clear need to move. The RBI was courageous to do it in between policies and during market hours,” he said. In a surprise move on Wednesday, May 4, the RBI increased the policy repo rate by 40 bps to 4.40 percent with immediate effect. Consequently, the standing facility rate stands adjusted to 4.15 per cent and the marginal standing facility rate and bank rate stands at 4.65 percent. The central bank also hiked the cash reserve ratio (CRR) by 50 bps to 4.5 percent. This will lead to excess liquidity being pulled out of the system, bankers said. Read more here
RBI Governor LIVE: Realty, auto, bank stocks tumble after RBI’s rate hike
Interest rate-sensitive realty, auto and bank stocks on Wednesday fell sharply after the Reserve Bank hiked its key interest rate by 40 basis points (bps) in an unexpected move to tame rising inflation. From the realty pack, DLF tanked 5.28 per cent, Indiabulls Real Estate declined 5.05 per cent, Sunteck Realty went lower by 4.61 per cent, Godrej Properties fell 4.33 per cent, Sobha (3.82 per cent), Oberoi Realty (3.37 per cent) and Brigade Enterprises (2.24 per cent) on the BSE.
The BSE realty index declined by 3.31 per cent to 3,418.45. Among auto counters, Ashok Leyland plunged 4.44 per cent, Bajaj Auto tanked 3.54 per cent, TVS Motor (3.31 per cent), Maruti (3.17 per cent), Hero MotoCorp (3.08 per cent), M&M (2.70 per cent) and Tata Motors (2.11 per cent). The auto index fell by 2.53 per cent to 24,280.80. Among bank stocks, Bank of Baroda tumbled 4.12 per cent, IndusInd Bank dipped 3.98 per cent, HDFC Bank (3.34 per cent), Bandhan Bank (3.33 per cent), AU Small Finance Bank (3.22 per cent), ICICI Bank (2.31 per cent), State Bank of India (2.27 per cent) and Federal Bank (0.05 per cent). The BSE bank index declined 2.29 per cent to 40,583.54. The 30-share BSE benchmark Sensex tumbled 1,306.96 points or 2.29 per cent to settle at 55,669.03. During the day, it plummeted 1,474.39 points or 2.58 per cent to 55,501.60.
RBI Governor LIVE: FADA President Vinkesh Gulati on RBI rate hike:
The RBI’s move of increasing repo rate by 40 bps has clearly taken everyone off guard. This move will curb excess liquidity in the system and will make auto loans expensive. While PV segment may be able to absorb this shock due to long waiting periods, 2W segment which has been a non performer due to underperforming rural market, vehicle price hikes and high fuel costs, it will not be able to take one more blow of high vehicle loan costs. Certainly, this move will apply certain amount of brakes on auto retail and dampen the sentiments further.
RBI Governor LIVE: Sanjay Palve, Senior Managing Director, Essar Capital Ltd on today’s RBI Monetary Policy:
“Reserve Bank of India’s decision of hiking the policy repo rate by 40 bps to 4.40per cent was a move to be taken sooner or later to tackle the rising inflation pressures and control excess liquidity. However, this in turn will strengthen the core economic growth and ensure stability in this rapidly evolving business environment at reasonable rate which is being impacted due to various geopolitical conflicts. MPC’s announcement of increasing the CRR by 50 bps will direct a setback of the easy liquidity state.”
RBI Governor LIVE: RBI hikes repo rate by 40 bps: How is it going to affect borrowers and depositors?
All of a sudden-and entirely unexpected-the Reserve Bank of India (RBI) on May 4 increased the repo rate by 40 basis points to 4.4 percent for the first time in almost two years since the start of the pandemic in 2020. One basis point is one-hundredth of a percentage point. This comes when inflation has been rising to an 18-month high amidst a rebound in domestic economic activity. “From a real estate point of view, this hike in policy rate is not welcome and will have a negative impact as home loan rates will increase immediately,” says Dr Samantak Das, Chief Economist, and Head Research and REIS, India, JLL. Let’s go into the finer details of this announcement and its impact on the borrowers and depositors. Read more here
RBI Governor LIVE: RBI policy: Bond yields will harden to 7.75%, Nifty to range 17,500-15,000
Breaking away from scheduled announcements, the Reserve Bank of India’s May 4 decision to hike the repo rate by 40 basis points (bps) to 4.4 percent soon after unchanged rates in April is an indication that the RBI is making an early move to recalibrate its normalisation trajectory against higher-than-projected inflation and fast US monetary policy normalisation. Two critical messages from the RBI are a) post the ebbing of Omicron worries, pent-up demand recovery is getting widespread, b) the demand recovery will likely aggravate the inflation scenario, which touched 7 percent in March 21; core inflation has averaged 6 percent in recent months. The RBI has enumerated several factors for the higher-than-expected inflation, most of which were known beforehand. Read more here
RBI Governor LIVE: Gulam Zia, Senior Executive Director- Knight Frank India: “With the rapidly changing geopolitical scenario that continues to pressurize the global supply chain and commodity prices, domestic policy rates were expected to be realigned to the changing scenario. Therefore, while not unexpected, as the RBI Governor had already shared concerns over rising inflation, the interest rate hike amidst rising input costs is expected to have its impact on real estate. The sector has vastly benefited by the low interest rates in the last two years. This policy rate hike will translate into higher EMIs for home loans. However, we believe that improved homebuyer attitude, preference for owning a house and strong wage growth will continue to support the housing market. The monetary policy stance is still accommodative and with the receding pandemic and economic growth, we expect that consumer demand will remain buoyant in the near term”.
RBI Governor LIVE: RBI’s rate hike shock sends markets spiralling lower
Stocks and bonds reacted in knee-jerk fashion after Reserve Bank of India governor Shaktikanta Das announced a surprise 40 basis point increase in the key interest rate on May 4. Citing inflationary pressures that were going beyond control, the RBI’s Monetary Policy Committee (MPC) called an unscheduled meeting and unanimously decided to increase the repo rate to 4.4 percent with immediate effect. The repo rate is the rate at which the RBI lends money to banks for short-term requirements. The interest rate decision finally ends speculation over when the RBI would move away from its ‘accommodative’ stance, even though the governor said that “the 40 bps rate hike today was not a shift in policy accommodation. The stance and policy conditions still remain accommodative and the rate increase merely reversed the 40 bps repo cut delivered in May 2020.” The standing deposit facility rate is now at 4.15 percent. The RBI also decided to increase the cash reserve ratio (CRR) by 50 bps to 4.5 per cent of net demand and time liabilities, effective from the fortnight beginning May 21. Read more here
RBI Governor LIVE: RBI climbs the policy curve, tries to bridge the credibility gap
What changed in the one month since the last monetary policy review for the rate-setting committee to announce a mid-cycle rate hike? After all, the Russia-Ukraine war has been ongoing for two months now, disrupted global supply chains are no closer to being mended than they were a month ago, and even core inflation in India has been above 6 percent for quite some time, which the central bank chose to ignore. The trigger, perhaps, could be a couple of factors. Read more here
RBI Governor LIVE: Rupa Rege Nitsure, Group Chief Economist, L&T Financial Holdings, Mumbai:
“The ‘surprise move’ by the RBI is not a surprise to me given the turn of events in the past few weeks. The central bank has to take these steps to prevent an extreme fall in the value of our currency and protect financial stability. “A hike in the policy repo rate and the CRR are the most appropriate steps when the nation is facing galloping inflation and a widening trade deficit. These are a kind of emergency measures to control extreme financial outcomes.”