Tagged: CRR hike

RBI lifts key rates, CRR; signals more tightening

Reuters | Tue Apr 20, 2010 | 3:04pm IST

The Reserve Bank of India (RBI) on Tuesday raised key interest rates by 25 basis points, as expected, to battle near double-digit inflation, signaling gradual tightening ahead to sustain growth and manage record government borrowing. The Reserve Bank of India’s measured steps, which included raising the cash reserve ratio (CRR) requirement for banks by 25 basis points, increased the likelihood of another rate rise before its next quarterly review in July, some watchers said. The yield on the 10-year benchmark bond traded at 8.01 percent, down 7 basis points on the day, after easing to 7.98 percent after the RBI announcement, its lowest since April 13, as some players had bet on a bigger 50 basis point rise. The main 30-share BSE index was up 0.4 percent.

"The policy statement is not hawkish enough to address the concerns on the inflation front," said Rupa Rege Nitsure, chief economist at the Bank of Baroda in Mumbai. Price pressures are spreading beyond food to costs of fuel and manufactured goods such as cars. March inflation reached 9.9 percent year-on-year, its fastest pace in 17 months. However, the RBI is under pressure from the government not to raise rates aggressively, with New Delhi worried it could dent economic growth and also complicate its borrowing, which will reach a record $100 billion in the current fiscal year. "RBI at this juncture is more constrained by the management of the government’s record borrowing programme," Nitsure said.

The RBI is expected to raise rates by a further 100 basis points over the next 12 months, according to the one-year overnight indexed swap (OIS) rate at 4.95 percent. That is in line with a Reuters poll ahead of Tuesday’s review, which forecast 100 basis points of tightening by the end of 2010. "The next scheduled  

Continue reading


China banks ordered to increase reserves again

BBC NEWS | 2010/02/12 | 12:19:01 GMT

China has ordered banks to increase their reserves for a second time this year, as lending is curbed in a bid to stop the country’s economy overheating. Analysts had expected the central bank to increase reserve levels again, but were surprised it ordered a second increase so soon after January’s move. The bank has told commercial lenders to hike their reserve levels by 0.5%, to 16.5%, by 25 February. China’s economy grew 10.7% in the final quarter of 2009 against a year earlier. For the whole of last year, it expanded by 8.7%.

Further increases

“The central bank is sending out clear messages to banks that it wants more reasonable bank lending and it is paying close attention to inflation,” said Xie Xuecheng at Southwest Securities in Beijing. Figures published by the central bank on Thursday showed that last month’s increase in reserves held by banks did little to rein in lending. Lending by Chinese banks hit 1.4 trillion Yuan ($205bn; £131bn) in January, one of the highest monthly totals on record. This means further increases in bank reserves are likely, analysts said. “The hike will still not fundamentally tighten liquidity too much and there will be more reserve hikes upcoming,” said Shi Lei at the Bank of China.

RBI lifts cash reserve ratio holds rates

Reuters | Mumbai | Fri Jan 29, 2010 | 1:55pm IST

(Click to enlarge)

The Reserve Bank of India (RBI) surprised markets by raising banks’ cash reserve requirements by more than expected and warned of mounting inflation, suggesting its next move may be an interest rate rise. The Reserve Bank of India (RBI) kept short-term interest rates steady at its quarterly policy review on Friday and warned that monetary policy would be ineffective unless the government rolls back its borrowing, on track to hit a record 4.5 trillion rupees ($97 billion) this fiscal year. The RBI lifted the reserve ratio by 75 basis points rather than by up to half a percentage point as pencilled in by markets, joining other Asian central banks in gradual tightening of loose monetary policies.

On Thursday, the Philippines raised a rate on a short-term lending facility, and this month China started to tighten policy by raising banks’ reserve requirements, clamping down on loan growth and accepting higher yields at bill auctions. Despite rising inflationary pressures, the government has pressured the RBI to hold off raising rates, saying it would undermine economic recovery, hurt only slowly picking up bank lending and spark potentially destabilising capital inflows. “An increased confidence in recovery has encouraged RBI to clearly and explicitly shift their stance from ‘managing the crisis’ to ‘managing the recovery’,” said Deepali Bhargava, economist at ING VYSYA Bank in MUMBAI.     Continue reading

RBI seen holding rates, raising CRR next week

Reuters | Fri Jan 22, 2010 | 1:48pm IST

A Reuters poll found 24 out of 25 economists expected the RBI to raise the cash reserve ratio (CRR), the proportion of deposits banks need to keep with the Reserve Bank of India, by up to 50 basis points in its Jan. 29 policy review. By the end of April, one analyst expected the total quantum of CRR increase at 150 basis points, while nine saw a total of 100 basis points rise and three projected the CRR to go up by 75 basis points. Eight out of 25 analysts polled expected the RBI to raise its reverse repo and repo rates by 25 basis points each. Other analysts expected no change to policy rates. Twenty-three analysts expected the central bank to raise both the reverse repo and repo rates by between 25 and 100 basis points by the end of April, when the RBI announces its annual review for the fiscal year 2010/11.

Seven out of eight who expected a rate increase in the January review, forecast a further rise in the reverse repo and repo rates by April. Twelve expected a rise of at least 50 basis points in the reverse repo rate by April, while only 10 expected the repo rate to rise by the same quantum. The central bank absorbs excess funds from the banking system at the reverse repo rate, which is at 3.25 percent, and lends money to banks at the repo rate, which is 4.75 percent.     Continue reading