India's forex reserves climb for 8th straight week
Indias foreign exchange reserves (Forex) rose by USD 1.983 billion to USD 688.129 billion in the week that ended on April 25, extending gains for the eighth straight week, official data released by the Reserve Bank of India (RBI) this week showed.
The RBI data shows that foreign currency assets (FCAs) witnessed an uptick of USD 2.168 billion reaching at USD 580.663 billion.
In the reported week, the gold reserves with the RBI declined by USD 207 million, standing at USD 84.365 billion.
The Special Drawing Rights (SDRs), which are kept with the International Monetary Fund (IMF), witnessed a rise reaching USD 18.589 billion, up USD 21 million in the reporting week.
Indias foreign exchange reserves rose USD 8.310 billion to USD 686.145 billion in the week that ended on April 18.
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Indian Express
an hour ago
- Indian Express
RBI Policy: Why the MPC is likely to cut repo rate for the third consecutive time
The Reserve Bank of India's (RBI) six-member Monetary Policy Committee (MPC) is expected to cut the repo rate – the key policy rate – by 25 basis points (bps) in the policy meeting scheduled from June 4 to 6, to support growth as inflation continues to remain below the 4 per cent target. This would be the third consecutive reduction in the repo rate since February 2025. A section of analysts, however, are of the view that the MPC may deliver a 50 bps cut to boost growth. Economists also believe that the RBI may maintain the 'accommodative' monetary policy stance. With benign inflation, there has been a consensus among economists that the six-member MPC will cut the repo rate by 25 basis points (bps) to 5.75 per cent in the policy scheduled to be announced on June 6. One basis point (bps) is one-hundredth of a percentage point. 'We expect RBI to cut policy rates by 25 bps in June. The space to cut policy rates is derived from sharp deceleration in inflation. Meanwhile, given the uncertainty on demand conditions both domestic and external, growth requires money policy support,' said IDFC First Bank Chief Economist, Gaura Sengupta. Headline inflation, as measured by year-on-year changes in the all-India consumer price index (CPI), moderated to 3.2 per cent in April, the lowest since July 2019, from 3.3 per cent in March. The easing in CPI has been driven by the sustained fall in food prices. Economists said that with inflation remaining below the 4 per cent target in the last three months (February, March and April), and a sharp fall in food inflation, CPI is likely to durably align with the 4 per cent target over a 12-month period. Under the flexible inflation targeting (FIT) framework, the RBI has been mandated by the government to maintain CPI at 4 per cent with a band of +/-2 per cent. 'The benign inflation outlook and moderate growth warrant monetary policy to be growth supportive, while remaining watchful about the rapidly evolving global macroeconomic conditions,' the RBI said in the annual report for 2024-25. State Bank of India's Group Chief Economic Adviser Soumya Kanti Ghosh said, 'We expect a 50-basis point rate cut in June 2025 policy as a large rate cut could reinvigorate a credit cycle.' If RBI reduces the repo rate by 50 bps, the 10-year benchmark yield is likely to fall by 10-15 bps. On Thursday, yield on the new 10-year bond (6.33%-2035) closed at 6.19 per cent. The MPC's announcement will come a day after the European Central Bank (ECB) announced to lower the interest rate by 25 bps. Accordingly, the interest rates on the deposit facility, the main refinancing operations and the marginal lending facility will be decreased to 2 per cent, 2.15 per cent and 2.4 per cent respectively, with effect from June 11, 2025. Will there be a change in the policy stance? The MPC is likely to retain the monetary policy stance as 'accommodative', analysts said. In the April policy, the rate-setting panel had changed the stance from neutral to accommodative. According to economists, the RBI is likely to revise its projections on real gross domestic product (GDP) and inflation for FY2026. 'The commentary on both growth and inflation will be important as there are expectations of revisions in their forecasts for both the parameters. It is also expected that the RBI will detail its analysis on how the global environment would be affecting the Indian economy considering that the tariff reprieve provided by the USA would end in July,' said Madan Sabnvis Madan Sabnavis, Chief Economist at Bank of Baroda. As per the RBI's estimate, CPI inflation for 2025-26 is expected to be at 4 per cent. The easing of supply chain pressures, softening of global commodity prices and higher agricultural production on the back of a likely above-normal south-west monsoon augur well for the inflation outlook in 2025-26, the RBI's annual report said. 'Any potential downward revision in FY26 CPI inflation will be closely watched, as it will provide an indication of the depth of the rate cutting cycle,' said IDFC First Bank's Sengupta. The real GDP growth for 2025-26 is projected at 6.5 per cent. In the quarter ended January-March 2025, the domestic economy picked up pace and grew at a four-quarter high of 7.4 per cent. For the financial year 2024-25, the growth rate stood at 6.5 per cent, which was a four-year low. 'The Indian economy is poised to sustain its position as the fastest growing major economy during 2025-26, supported by pickup in private consumption, healthy balance sheets of banks and corporates, easing financial conditions and the government's continued thrust on capital expenditure,' the RBI's annual report said. How would a repo rate cut impact borrowers? If the repo rate is reduced by 25 bps, all external benchmark lending rates (EBLR) linked to it will decline by a similar margin. It would be a relief for borrowers as their equated monthly instalments (EMIs) on home and personal loans will drop by 25 bps. Following a 50 bps cut in the repo rate since February 2025, most banks have reduced their repo-linked lending rates by the same magnitude. Lenders have also lowered their marginal cost of funds-based lending rate (MCLR). Is RBI likely to cut the repo rate further? Following the likely repo rate cut in the June policy, the RBI may go for a total reduction of 50 bps in the current financial year, experts said. 'Two more cuts over the subsequent two policy reviews are expected, taking the repo rate to 5.25 per cent by the end of the cycle,' said Aditi Nayar, Chief Economist, ICRA Ltd. 'We expect a 25bp rate cut at the upcoming June 6 meeting, followed by another in August, taking the repo rate to 5.5 per cent,' HSBC Global Research said in a report. The RBI may pause in October to evaluate the transmission of monetary policy to lending and deposit rates. 'We forecast a final rate cut in December, although much will depend on the state of growth around then,' the report said.
Indian Express
an hour ago
- Indian Express
Rapid uptake of crypto in developing economies raises concerns, says IMF's Gita Gopinath: Here's why
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Flagship cryptocurrency Bitcoin's price stood at $104,512.82 apiece, down 0.07 per cent, at 7:30 pm on Thursday. Last month, Bitcoin breached the $110,00 mark for the first time after the passage of the GENIUS Act Bill in the US Senate owing to bipartisan support. If passed the GENIUS Act is also expected to allow crypto companies to produce more stablecoins. Issuers must be in compliance with anti-money laundering provisions and anti-terrorism regulations, according to the Bill's fine print. Further, stablecoins issuers must back the digital currency with fiat currency or highly liquid assets in a 1:1 ratio. They must also maintain separate reserves to backstop the stablecoins, according to the GENIUS Act Bill. Democratic Senator Mark R Wright, who backed the bill, stated that while there were concerns about the Trump family's involvement in cryptocurrencies to 'evade oversight, hide shady financial dealings, and personally profit at the expense of everyday Americans… blockchain technology is here to stay.' He said it was in America's interest to take the lead on shaping crypto policies. Democratic Senator Elizabeth Warren warned that the GENIUS Act Bill did not meet the minimum standards such as guaranteeing consumer protection and preventing the illicit use of stablecoins. Passage of the GENIUS Act may pose a risk since the illicit use of stablecoins already make up 60 per cent of unlawful crypto transactions. If passed, the GENIUS Act is expected to boost the stablecoin market's growth by 10X to $2 trillion, Warren said citing industry estimates. Developing countries and their dalliance with cryptocurrencies Pakistan recently announced a collaboration between the Pakistan Crypto Council and the WLFI, which envisages the use of blockchain technology to promote financial inclusion. It also aims to monetise national assets such as rare earths besides using stablecoins in trade and remittance. Pakistan eyes the status of a regional crypto hub as a result of this agreement. Experts warn of the inherent instability of the crypto asset system. To elaborate on Gopinath's warning, a paper titled 'Crypto assets as a threat to financial market stability' states that currencies of emerging and developing economies may lose their importance as store of value owing to higher inflation rates, leading to a rising degree of substitution of the domestic currency by a foreign currency. According to an UNCTAD study, this may result in the 'cryptoisation' of emerging and developing economy currencies relative to their GDP and backed by factors such as a younger population as well as macroeconomic stability. In Central America, El Salvador, which approved Bitcoin as official tender in 2021, the cryptocurrency has seldom found use as a means for buying goods and services. Stablecoins may also pose a risk similar to that seen during a bank run — when depositors and investors rush to cash their assets after a bank is unable to honour its financial commitments owing to a shortage of assets. According to the paper cited above, the linkage of stablecoins to a currency creates arbitrage opportunities leading to speculation. Former US Treasury Secretary Janet Yellen during a US Congressional hearing said fears of inadequate asset backing for stablecoins may also lead to a sell off triggering a situation similar to a bank run. In March this year, Trump announced the creation of a strategic crypto reserve — a basket comprising Bitcoin, Ethereum, XRP, Solana and Cardano. While flagging 'corrupt attacks (on cryptocurrencies) by the Biden administration' Trump in a Truth Social post said the US Crypto Reserve, part of his executive order on digital assets will 'elevate this critical industry'. 'I will make sure the US is the Crypto Capital of the World,' Trump said. Under Trump, the US has dropped probes and legal lawsuits related to alleged securities violations against cryptocurrency firms and exchanges. The US government holds an estimated 200,000 Bitcoin pending an audit, according to a fact sheet shared by the White House. To be sure, the US crypto reserve will only store digital tokens obtained through forfeiture proceedings — it will not purchase additional reserves at the cost of the American taxpayer's money, according to the White House fact sheet.
New Indian Express
an hour ago
- New Indian Express
Flipkart gets RBI approval for direct lending
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