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What comes from RBI: Inflation forecast cuts, dovish interest rate stance

(This story was originally April 7, 2021)

Mumbai: Covid’s second wave in India will be forced Reserve Bank of India (RBI) Governor Shaktikanta Das sticks to accommodative monetary policy, despite being expected to announce the current state of the policy rate on Wednesday.

Long-term repo transactions and the purchase of government bonds from banks are expected to strengthen the easing stance. In addition to the dovish nature of the RBI’s stance, inflation expectations could decline.

according to Bank of America According to a global survey, a month of national blockade costs 100-200 basis points (100bps = 1 percentage point) of gross domestic product (GDP) “given the high economic costs”. Bank of America Securities’ research report shows that the RBI injects liquidity by buying bonds, combining long-term repo transactions, and allowing banks to hold more bonds to maturity, thereby lowering them. We hope to reduce the risk of having to offer bonds. Evaluation.

HSBC’s Indian economist Pranjul Bhandari feels that the second wave will drive GDP growth. 2010 Spreads more evenly. Previously, growth was expected to surge in the first half due to the fundamental impact of the blockade in the first quarter of 2009. “We believe that new growth urges will be delayed rather than lost. Indeed, even if the pace of economic recovery slows a bit, it is already at a high level. It could boost activity from here. The service-driven growth that was there will probably now be fully realized in the second half of the year, not the first half, “Bandari said in a report.

Among the development measures, the RBI is expected to publish guidelines that facilitate some of the measures announced by the Minister of Finance. Union budget In February of this year. One of these measures is the establishment of the National Asset Reconstruction Company (ARC) by public sector banks. The RBI is not in favor of revising the rules on the basis of ownership and may readjust ARC’s standards.

The Minister of Finance has announced steps to support digital payments within the budget. The central bank announced the operationalization of the settlement infrastructure development fund last year and may now consider the same. RBI has been working hard to bring trade-in rupee derivatives (non-deliverable forwards) onshore. Further steps may be taken to deepen this market.

Earlier this month, the central bank complained to banks that it was unable to prepare for a new system of bank-led regular card payment authorization. The RBI has extended the compliance deadline, but there may be a framework for penalizing non-compliance.

What comes from RBI: Inflation forecast cuts, dovish interest rate stance What comes from RBI: Inflation forecast cuts, dovish interest rate stance

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