RBI Monetary Policy Highlights: RBI cuts repo rate for fifth time in a row; loans to get cheaper

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Updated:Oct 04, 2019 2:16:35 pm

RBI Monetary Policy October 2019 Highlights: The Reserve Bank of India has cut the repo rate by 25 basis points in today's review, the fifth time in a row.

rbi monetary policy, rbi monetary policy time today, rbi monetary policy time, rbi monetary policy october 2019, rbi monetary policy today, monetary policy, rbi policy, monetary policy of rbi, rbi monetary policy time today, rbi monetary policy timing, rbi monetary policy 2019 dates, rbi monetary policy meet todayRBI has lowered the GDP forecast for the current fiscal year to 6.1 per cent from 6.9 per cent.

RBI Monetary Policy October 2019 Highlights: The Reserve Bank of India has cut the repo rate by 25 basis points in today’s review, the fifth time in a row. Since February, the RBI has cut the repo rate by 135 basis points. The repo rate is now 5.15 per cent. However, the latest cut in the repo rate is more likely to make the retail loans cheaper as most of the banks have started to issue repo rate-linked loans. Earlier, the measures related to the reduction in the lending rates could not reach the end customer substantially.  

“The RBI has already cut rates by 110 basis points in its four meetings but the transmission is bad. Only 30-40 per cent of repo rate cuts are actually transferred into a lower lending rate,” Pranjul Bhandari of HSBC Securities and Capital Markets said in an interview with ET Now. 

Due to the projection of continuing weak demand, volatile oil prices and near-term price pressures, the RBI has also revised CPI inflation projection slightly upwards to 3.4 per cent for Q2 FY20, while projections are retained at 3.5-3.7 per cent for H2 FY20. However, given that inflation is still within the RBI’s target range, the RBI has maintained its stance as ‘accommodative’. Meanwhile, amid the sustained weakness in demand, the RBI has lowered the GDP forecast for the current fiscal year to 6.1 per cent from 6.9 per cent.

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Highlights

    14:02 (IST)04 Oct 2019
    Further reduction of repo rate is a much needed and encouraging move

    "Further reduction of repo rate is a much needed and encouraging move and will propel the Indian real estate industry into a recovery drive in the near future. It will now definitely be a buoyant festive season for the sector. This move will ease liquidity and leave more money in the hands of home buyers. Despite the reduction in repo rates by the RBI in the previous reviews, it did not have any significant impact on lending rates. We now hope that the current rate cut would translate into lower EMIs and help soften home loan rates and also boost sales," Kiran John, Joint Managing Director of Terapact.

    13:58 (IST)04 Oct 2019
    Further rate cuts may be expected in forthcoming policy reviews.

    'Further rate cuts may be expected in forthcoming policy reviews. While money market rates eased in response, bond yields inched up slightly as traders remain apprehensive of larger than currently scheduled borrowings by the government. The market will now look forward to any possible OMO purchase operations to get comfort on the absorption of additional supplies if any. We expect overall bond yields to remain range-bound with easing bias,'  said Mahendra Jajoo- Head-Fixed Income, Mirae Asset Global Investments.

     

    13:54 (IST)04 Oct 2019
    Global factors will assume centre stage now, which will determine near term movements in the yield

    "With the intent to maintain adequate liquidity in the banking system, bond yields could remain well-anchored. This is conducive especially for the short end of the yield curve. Global factors will assume centre stage now, which will determine near term movements in the yield," said  Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mahindra Asset Management Company.

     

    13:51 (IST)04 Oct 2019
    Welcome move showing the alignment of monetary and fiscal policy initiatives

    The 25 bps rate cut is definitely a welcome move showing the alignment of monetary and fiscal policy initiatives in the backdrop of a downward revision in the GDP growth to 6.1% for FY 20. In sync with the general market sentiment, the fourth consecutive rate cut during 2019 by the RBI is aimed at uplifting the growth trajectory of the Indian economy. Riding along the same track, the real estate sector, too, is likely to witness accelerated sales owing to favorable policy reforms and the gradual transmission of rate cuts to end-consumers through lowering of mortgage rates. -  Ramesh Nair, CEO & Country Head – India, JLL.

    13:48 (IST)04 Oct 2019
    Strong signal that further rate cuts are not off the table.

    The MPC's decision to retain the accommodative stance for as long as necessary to revive growth, is a strong signal that further rate cuts are not off the table. The upcoming GDP growth print for Q2 FY2020 is likely to crucially influence whether a sixth consecutive rate cut is announced in the December 2019 policy review, as well as the magnitude of the reduction - Aditi Nayar.

    13:44 (IST)04 Oct 2019
    Cut in the GDP growth forecast underscores limited likelihood of an immediate revival

    The substantial cut in the GDP growth forecast for FY2020 underscores the extent of the growth slowdown and the limited likelihood of an immediate revival despite the cumulative 135 bps of monetary easing undertaken by the MPC in 2019 as well as the measures announced by the Government, Says Aditi Nayar, Principal Economist, ICRA Ratings. 

    13:38 (IST)04 Oct 2019
    Accommodative monetary policy is important at this juncture apart from easing fiscal policy transitions

    Continued Accommodative monetary policy is important at this juncture apart from easing fiscal policy transitions implemented by the government in the form of tax sops given to individuals as well as corporate which may result in higher fiscal deficits from budgeted 3.3% if the government wants to continue supporting GDP, said Parth Mehta. 

    13:33 (IST)04 Oct 2019
    Consumer spending hasn’t bounced, despite repo rate-linked loans

    “Though the transmission of lowered rate cuts has started by banks for retail consumer loans & home loans in a minimal way yet consumer spending hasn’t bounced back which is need of the hour to propel GDP back,” Parth Mehta, Managing Director, Paradigm Realty

    13:28 (IST)04 Oct 2019
    Manufacturing firms see a weakening of demand conditions in Q2 and Q3 of FY20

    RBI’s consumer confidence survey shows weak consumer sentiment and tepid consumption demand, especially relating to non-essential items. Manufacturing firms see a weakening of demand conditions in Q2 and Q3 of FY20 and expect their output prices to soften, going forward, as the cost of finance and salary outgo remain muted.

    13:21 (IST)04 Oct 2019
    Households expect inflation to rise by 40 basis points over a 3-month ahead horizon

    The Reserve Bank’s September 2019 round of inflation expectations survey indicates that households expect inflation to rise by 40 basis points over a 3-month ahead horizon and 20 basis points over a one-year ahead horizon, possibly responding adaptively to the rise in food prices in recent months.

    13:18 (IST)04 Oct 2019
    Services sector activity weakened in July -August.

    High frequency indicators suggest that services sector activity weakened in July -August. Indicators of rural demand, viz., tractor and motorcycles sales, contracted.

    13:17 (IST)04 Oct 2019
    New orders and employment improved marginally, and new export orders declined.

    The manufacturing purchasing managers’ index (PMI) for September 2019 was unchanged at its previous month’s level; new orders and employment improved, albeit marginally, and new export orders declined.

    13:14 (IST)04 Oct 2019
    Manufacturing and business to fall in second quarter

    Manufacturing firms polled for the industrial outlook survey (IOS) expect capacity utilisation to moderate in Q2 FY20. The Reserve Bank’s business assessment index (BAI) fell in Q2 FY20 due to a decline in new orders, contraction in production, lower capacity utilisation and fall in profit margins of the surveyed firms.

    12:59 (IST)04 Oct 2019
    Surplus liquidity in system

    Overall liquidity remained surplus in August and September 2019 despite the expansion of currency in circulation and forex operations by the Reserve Bank draining liquidity from the system.

    12:53 (IST)04 Oct 2019
    Shaktikanta Das has appealed the people to not take actions based on rumours

    Shaktikanta Das reaffirmed that the Indian banking system is sound and stable and has appealed the people to not take actions based on rumours.

    12:40 (IST)04 Oct 2019
    PMC Bank case: Every incident is an experience.

    PMC Bank: Every incident is an experience. It will depend on the outcome of our review if we will take full control of regulation, says Shaktakanta Das

    12:35 (IST)04 Oct 2019
    There is policy space to address growth concerns by reinvigorating domestic demand within the flexible inflation targeting mandate

    With inflation expected to remain below target in the remaining period of 2019-20 and Q1 FY21, there is policy space to address these growth concerns by reinvigorating domestic demand within the flexible inflation targeting mandate. It is in this context that the MPC decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target - RBI.

    12:31 (IST)04 Oct 2019
    Rural demand and urban demand contraction is a result of various factors

    Rural demand and urban demand contraction is a result of various factors such as stress on income, domestic savings, etc, says Shaktikanta Das

    12:26 (IST)04 Oct 2019
    One incident should not be used to generalise about the health of the cooperative bank sector, says the RBI governor.   

    As soon as the PMC bank issue came to RBI's notice, the central bank has worked very swiftly. However, one incident should not be used to generalise about the health of the cooperative bank sector, says the RBI governor.   

    12:24 (IST)04 Oct 2019
    It does take time for the impact to filter in the real economy, says Shaktikanta Das

    It does take time for the impact to filter in the real economy and the central bank will also have to see the effect of the fiscal measures taken by the government, therefore, RBI has not lowered the repo rate by more than 25 basis points.

    12:20 (IST)04 Oct 2019
    RBI will continue with the accommodative stance

    RBI will continue with the accommodative stance till the momentum of the GDP does not revive - Shaktikanta Das

    12:19 (IST)04 Oct 2019
    The global markets have further weakened since the last meeting

    The global markets have further weakened since the last meeting and the central banks have tried to maintain their stance as accommodative - Shaktikanta Das

    12:19 (IST)04 Oct 2019
    The global markets have further weakened since the last meeting

    The global markets have further weakened since the last meeting and the central banks have tried to maintain their stance as accommodative - Shaktikanta Das

    12:16 (IST)04 Oct 2019
    No reason to doubt that government will maintain the fiscal deficit

    'We have no reason to doubt that the government will maintain the fiscal deficit,' says Shaktikanta Das

    12:13 (IST)04 Oct 2019
    NEFT service to be available round the clock

    To improve the payment system, NEFT service will be available for 24 hours now, says Shaktikanta Das

    12:10 (IST)04 Oct 2019
    CPI inflation broadly in line with projections.

    CPI inflation was projected at 3.1 per cent for Q2 FY20, 3.5-3.7 per cent for H2 FY20 and 3.6 per cent for Q1 FY21 with risks evenly balanced. The actual inflation outcomes for Q2 so far at 3.2 per cent have been broadly in line with these projections, said Shaktikanta Das

    12:01 (IST)04 Oct 2019
    RBI members unanimously voted to reduce the repo rate

    "RBI member unanimously voted to reduce the repo rate by 25 basis points, all five members supported the cut," said Shaktikanata Das. 

    11:54 (IST)04 Oct 2019
    Loan cap for microfinance companies raised

    RBI says loan cap for microfinance companies has been raised. 

    11:52 (IST)04 Oct 2019
    CPI inflation target at 3.5%-4%

    CPI inflation target at 3.5%-4%. 'If rains are normal, there will be no shocks', says RBI. 

    11:51 (IST)04 Oct 2019
    Repo, Reverse Repo

    The new Repo Rate stands at 5.15%; Reverse Repo Rate now stands at 4.9%; Marginal Standing Facility Rate now stands at 5.4% under the RBI's Liquidity Auction Facility (LAF).

    11:48 (IST)04 Oct 2019
    RBI lowers FY20 GDP target

    RBI says, FY20 GDP growth target cut to 6.1% from 6.9%.

    11:47 (IST)04 Oct 2019
    Stance Accomodative

    RBI maintains Monetary and Credit Policy stance at 'Accomodative', as was widely expected. Persistently low inflation within the target range may have given RBI the room to remain accomodative.

    11:45 (IST)04 Oct 2019
    RBI cuts repo rate by 25 basis points

    RBI cuts repo rate by 25 basis points to 5.15%.

    11:38 (IST)04 Oct 2019
    Repo rate was cut by 35 basis points in August meeting

    Repo rate was cut by an unprecedented 35 basis points in the August meeting, coming down from 5.75 per cent to 5.4 per cent. 

    11:34 (IST)04 Oct 2019
    HSBC Securities and Capital Markets projects another 50 basis points cut in repo rate this calendar year

    Followed by the 25 basis points cut in today's review meeting, a cut in December meeting is also likely. "The RBI has already cut rates by 110 basis points but the transmission is bad. Only 30-40 percent of repo rate cuts are actually transferred into a lower lending rate," Pranjul Bhandari of HSBC Securities and Capital Markets said in an interview at ET Now.

    11:29 (IST)04 Oct 2019
    Next Monetary Policy Review will take place on 5th December 2019

    The Monetary Policy Committee (MPC)  meet started on October 1, and continued for 3rd and 4th October 2019 for the Fourth Bi-monthly Monetary Policy Statement for 2019-20. The next meeting review will take place on 5th December 2019.

    11:23 (IST)04 Oct 2019
    HSBC Securities and Capital Markets estimates GDP forecast of 2019-20 below 6 per cent

    "The RBI is likely to lower the GDP growth forecast to 6-6.5 per cent, but we expect it to be even below 6 per cent in the current fiscal year," Pranjul Bhandari of HSBC Securities and Capital Markets said in an interview at ET Now.

    11:17 (IST)04 Oct 2019
    HSBC Securities and Capital Markets expects a 25 basis points cut in repo rate

    "We expect a 25bps rate cut today. She added that MPC is likely to hold on to its accommodative stance and liquidity is to be held in surplus in the future," Pranjul Bhandari of HSBC Securities and Capital Markets said in an interview at ET Now.

    11:13 (IST)04 Oct 2019
    Repo rate cut could make EMIs cheaper

    The cut in repo rate is likely to make loans cheaper almost immediately as many banks have linked the interest rates on their variable rate loans directly with the repo rate.

    11:08 (IST)04 Oct 2019
    Pressure of credit quality on banks is likely to sustain in near future

    Concerns relating to asset quality of the wholesale book, liquidity and asset-liability mismatches in the non-banking sector, coupled with slowing economic growth because of sluggish consumption and investment demand, implies that credit quality pressures will take a while to dissipate, said Jitin Makkar, Head-Credit Policy, ICRA.