Latest news with #LiquidityAdjustmentFacility
India Gazette
3 days ago
- Business
- India Gazette
RBI's rate cut will boost mid-segment housing affordability in top cities, say real estate executives
New Delhi [India], June 6 (ANI): The decision of the Reserve Bank of India (RBI) to reduce the policy repo rate will significantly help mid-segment housing across top-tier cities, translating into lower EMIs (Equated Monthly Installment) and better affordability, said real estate executives, terming it a 'strategic move'. The policy rates massively impact the sale of the real estate infrastructure, as lowering of rates means lower interest rates from banks for the home buyers and cheaper EMIs. The policy rate cuts have a massive impact on the real estate sector. This effectively lowers the cost of borrowing, making home loan EMIs easier on the pocket and thereby directly improving affordability for buyers. RBI's MPC, after the meeting today, decided to reduce the policy repo rate under the Liquidity Adjustment Facility by 50 basis points to 5.5 per cent. This larger-than-expected cut in the repo rate was accompanied by a 100 bps cut in the Cash Reserve Ratio (CRR), now reduced to 3 per cent, aimed at enhancing liquidity by Rs 2.5 lakh crore. 'The cumulative 100 basis point reduction over the last six months is a welcome and strategic move. We are particularly optimistic about its impact on the affordable housing sector, which has been under pressure on both the demand and supply sides. Lower interest rates will increase homebuyer affordability and improve the financial viability of affordable housing projects,' said Shekhar G Patel, President of the real estate industry body CREDAI. 'Not only will it make homeownership affordable and boost buyers' sentiments but it will also add new vigour to the economy, which in turn will augur well for both residential and commercial realty,' said Manoj Gaur, CMD, Gaurs Group. Anshul Jain, Chief Executive, India, SEA & APAC Tenant Representation, Cushman & Wakefield, in his analysis, said that RBI has today delivered a boost to consumer/household sentiment with a 50 bps cut, seen as positive for the real estate sector, particularly housing. 'With this, the cumulative cut for this year of 1 per cent is indeed going to help translate into lower EMIs and relatively better affordability, thereby helping the mid-segment housing across top-tier cities,' Jain added. Anuj Puri, Chairman of ANAROCK Group, shared similar views and added, 'This can potentially boost demand in the Indian real estate sector, especially in affordable and mid-income segments.' Commenting on the impact of the decision on the luxury segment, Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd, said, 'The demand for mid- and premium-segment homes has already been on the rise following previous rate cuts, and this larger reduction will further accelerate interest from both homebuyers and investors.' 'This move could spur refinancing activity and strengthen investment interest in branded properties known for their attractive returns, particularly among Grade A developers,' said Niranjan Hiranandani, Chairman, NAREDCO & Hiranandani Group. Umang Jindal, CEO at Homeland Group, said, 'More than numbers, it also paints a picture of a growing economy and a confident future.' Real estate sector has an important role to play. As per the government data, the real estate sector contributed around 7 per cent to India's GDP in 2018-19 and its share is expected to grow to around 13 per cent of India's GDP in 2025. (ANI)
India Today
3 days ago
- Business
- India Today
RBI slashes key lending rate for 3rd consecutive time, brings it down to 5.5%
The Reserve Bank of India (RBI) on Friday reduced the key lending rate, or repo rate, by 50 basis points, bringing it down to 5.5% from 6%.The decision was announced after the central bank's Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, concluded its three-day meeting that began on June 4."After a detailed assessment of the evolving macroeconomic and financial developments and the economic outlook ahead, the MPC decided to reduce, which is rightly expected, under the Liquidity Adjustment Facility by 50 basis points to 5.5%. Consequently, the Standing Deposit Facility rate, which is the SDF rate, shall stand adjusted to 5.25%," the RBI Governor This is the third rate cut in a row, following a 25 basis point reduction in Malhotra also announced the change in stance by RBI. RBI changed its stance to neutral from its earlier stance of accomodative."After having reduced the policy repo rate by 100 basis points in quick succession since February 2025, the Monetary Policy Committee also felt that under the present circumstances, monetary policy is now left with very limited space to support growth. Hence, the MPC also decided to change the stance from accommodative to neutral," said RBI Governor further said that from here onwards, the MPC will be carefully assessing the incoming data and the evolving outlook to chart out the future course of monetary policy in order to strike the right growth-inflation fast-changing global economic situation too necessitates continuous monitoring and assessment of the evolving macroeconomic outlook," he Raichura- VP & Head of Finance at Ashar Group, said that for homebuyers, it translates to lower home loan interest rates, making homeownership more affordable and accessible."This is especially encouraging for first-time buyers and those looking to upgrade. For developers, improved buyer sentiment is likely to boost demand, allowing them to offer more attractive financing options and launch new projects with greater confidence. Overall, the rate cut sets the stage for a more vibrant market, benefiting both homebuyers and developers alike," he added. Must Watch
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Business Standard
02-05-2025
- Business
- Business Standard
RBI releases report on market timings; suggests extending call hours
A working group of the Reserve Bank of India (RBI), set up to review trading and settlement timings, has recommended extended trading hours for the call money market. This move will provide flexibility to banks for managing their balance sheets, while suggesting to retain the current trading hours for the government security and the foreign exchange markets. The working group, chaired by Radha Shyam Ratho, executive director, RBI, was tasked with reviewing existing market timings, identifying operational challenges, examining global practices, and recommending the way forward. The group recommended that the trading hours of the call money market be extended till 7 pm, while the trading hours for market repo and TREP (Tri-Party Repo) be synchronised and extended till 4 pm. It also recommended unifying the TREP trading hours for members settling obligations through Designated Settlement Banks (DSBs) and the RBI. Additionally, the group recommended preponing the timing of the pre-announced LAF (Liquidity Adjustment Facility) auction to 9.30 am-10 am, from the current 10 am-10.30 am slot. 'The extension in timing will offer them much flexibility in terms of their balance sheet management, because many a time what happens, if call money closes at 5 O'clock, there are lots of transactions which are not yet settled and, therefore, banks are unable to decide what to do with their overnight funds. So, it will offer them flexibility,' said a market participant. With regard to market hours for the government securities market, the group recommended continuing with the existing timings. However, it suggested that post-onshore market hours, transactions in government securities with non-residents could be permitted during the time window between 5 pm and 11.30 pm. Such transactions, if permitted, should be reported to NDS-OM on a T+1 basis before onshore market hours, and settled on a T+2 basis. 'The working group has taken these suggestions from the market and has made these recommendations. The market was looking for more flexibility,' said a dealer at a primary dealership. The group has not recommended any changes in the trading hours for interest rate derivatives and foreign exchange markets. Between 2014-15 and 2024-25, the annual turnover in the overnight money market increased from ₹281.37 trillion to ₹1,324.05 trillion, while the daily average turnover rose from ₹1.17 trillion to ₹5.52 trillion. This growth was largely driven by the expansion of the collateralised segment, where annual turnover rose from ₹245.27 trillion to ₹1,296.62 trillion, even as turnover in the call money market declined from ₹36.10 trillion to ₹27.42 trillion. The TREP segment currently accounts for the largest share in the overnight money market, with 69 per cent of daily average volume, followed by market repo at 29 per cent. The share of call money has gradually declined from 13 per cent in 2014-15 to about 2 per cent in recent years. The group reviewed the existing trading and settlement timings of various markets regulated by the RBI in light of developments in the financial markets over the past decade. It took into account various market timings-related considerations as well as feedback gathered through interactions with different market participants. The objective was to assess whether current timings continue to support market efficiency and to recommend changes that could further enhance operational effectiveness. Feedback on the report has been invited from stakeholders and members of the public by May 30, via email.
Hans India
23-04-2025
- Business
- Hans India
RBI frames new norms on LCR for banks
Mumbai: The RBI has issued new Liquidity Coverage Ratio (LCR) guidelines, which will require a bank to assign additional run-off rates of 2.5 per cent to internet and mobile banking-enabled retail and small business customer deposits with effect from April 1, 2026. Banks will also have to adjust the market value of Government Securities (Level 1 HQLA) with haircuts in line with margin requirements under the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF). In addition, the final guidelines also rationalise the composition of wholesale funding from 'other legal entities'. Consequently, funding from non-financial entities like trusts (educational, charitable and religious), partnerships, LLPs, etc., shall attract a lower run-off rate of 40 per cent as against 100 per cent currently. 'To give the banks adequate time to transition their systems to the new standards for LCR computation, the revised instructions shall become applicable with effect from April 1, 2026,' the RBI statement said. The Reserve Bank has undertaken an impact analysis of the above measures based on data submitted by banks, as on December 31, 2024. It is estimated that the net impact of these measures will improve the LCR of banks, at the aggregate level, by around 6 percentage points as on that date. Further, all the banks would continue to meet the minimum regulatory LCR requirements comfortably. The RBI is sanguine that these measures will enhance the liquidity resilience of banks in India, and further align the guidelines with the global standards in a non-disruptive manner, according to an RBI statement.
Time of India
22-04-2025
- Business
- Time of India
Transforming business models of banks
Dr Rao is currently teaching risk management in the institute of Insurance and Risk Management (IIRM). A career banker with Bank of Baroda, he held the position of General Manager - Strategic Planning, Later was Associate Professor with National Institute of Bank Management (NIBM) and was Director, National Institute of Banking Studies and Corporate Management (NIBSCOM). He writes for financial dailies on Banking and Finance and his work can be viewed in the public academic accomplishments include Ph.d in commerce from Banaras Hindu University (BHU), MBA ( Finance), LLB. He runs a Youtube channel - Bank on Me - Knowledge series He likes to share his perspectives with next generation potential leaders of the banking industry. His book on "Transformation of Public Sector Banks in India' was published in september 2019. His most interesting work is in blog. LESS ... MORE Banks are experiencing a tectonic shift in their asset-liability structure. Besides many, the key reason is compelling banks to borrow short and lend long due to a change in the pattern of resource inflows. The incremental credit deposit (CD) ratio is on the rise. The deposit growth has been trailing behind credit growth in the last three years. Deposit growth was 10.3 percent, 10.97 percent, and 14 percent during FY22, FY23, and FY24. The bank credit growth was at 13 percent, 17.3 percent, and 20 percent, surpassing deposit growth during the same period. Along with lower deposit growth, the Current Account and Savings Account (CASA) ratio is on the decline from 43.68 percent in FY22 to 39.95 percent by March 2024, as higher interest on term deposits is prompting customers to use term deposit products for placing savings. Banks are drawing on refinance wherever eligible to fund demand for credit, tapping RBI's Liquidity Adjustment Facility (LAF) windows, and borrowing from money markets and raising funds through certificates of deposits (CDs) at higher interest rates to meet the liquidity needs. The structural shift of ALM: The depletion in the household savings, increasing financial and digital literacy, digital banking system providing ready access to bank accounts, demographic shift in customer profile with higher risk appetite, etc, are synchronising with the development of alternate investment avenues for better perceived risk-adjusted returns. These developments are contributing to protracted ALM mismatches, increasing spill over to interest rate risk, and even impeding growth in some banks. RBI data on the Maturity Profile of Select Liabilities/Assets also resonates with the new trend. The percentage of liability book (deposits and borrowings) of over 5 years was at 42.5 percent, far shorter than the corresponding asset book (loans and investments) of over 5 years, held at 57.5 percent in March 2024. Similarly, even the share of low-cost current and savings (CASA) deposits to total deposits is also in decline. As of March 2024, even on a strong base of 265 crore deposit accounts and 40 crore borrowers, deepening financial inclusion, digital payments churning higher volumes, deposit accretion is unable to keep pace. During monetary policy – April 9, 2025, the repo rate has been brought down by 25 basis points to 6 percent. Since the portion of loans linked to external benchmark repo rates is repriced down, banks have started resetting their deposit interest rates down. The interest rates on savings bank and term deposits are softening to protect the margins of banks. Such realignment of interest rates becomes a market-driven necessity. What is more important for banks is to consider recasting the business models to stay competitive. Business Models of Banks: Even when the operating environment is changing, the business model (BM) continues to harp on mobilising deposits to balance lending and investment, subject to regulatory norms. In the last decade or so, due to increasing interconnectedness with NBFCs, collaboration with FinTech, embedded financing, and app-based lending, several new features have been added to core and non-core businesses. The focus is shifting to garnering fee income from non-core businesses, strategic alliances, identifying strategies for managing the risks associated with interconnectedness, and outsourcing risks. Interoperable technology has enabled centralisation of many homogeneous activities to a remote location operating on assembly line principles for faster turnaround time. The shift in BM driven by change in market dynamics is not adequate unless it is fully customised by the banks, well aligned with the mix of evolving assets and liabilities, and its maturity profile. With intense competition from NBFCs, differentiated banks, and Fintech collaborations and the insurance sector recharged after Covid-19, the BM of banks needs to reshape to align with current realities to manage risks, develop resilience to adopt new lines of business, and address challenges. Banks should factor the impact of PESTLE, VUCA, and SWOT analysis built upon the power of new forms of technology such as big data, analytics, ML, DL, AI, agentic AI, GenAI, and quantum computing techniques. It is also important to test the efficacy of BM by using simulation and stress testing to align with the best feasible business combination and risk management practices. While freezing BM for say 5 years, its annual review will help to factor in risk events like the presently unleashed tariff war, which can change the business equation. Way forward: The mandarins of the banking system have been harping on banks to work out new business strategies to aggressively mobilize resources, create avenues to expand credit to lift the credit-to-GDP ratio from the present 56 percent to 130 percent to meet the aspirations of Viksit Bharat–2047. With only 2 Indian Banks in the top 100 global banks, Indian banks are trailing far behind in terms of asset size in the global ranking. Banks should shore up their asset base and improve their risk appetite to get to a stronger footing. In the recent monetary policy RBI expanded the scope of Co-lending among regulated entities, refining the regulatory dimensions governing Gold Loans, and guidelines on partial credit enhancement are poised to be made more friendly for large borrowers to raise funds from the market. Grasping the spirit of changing regulations, regulated entities should make the BM receptive to change. Banks should explore the use of AI tools to identify soft spots where blue ocean strategies could be applied to potentially create new avenues to lasting business solutions. Financial inclusion data should be analysed to find the aspirational districts that have more potential to grow and direct the resources to such geographies to optimise efforts. While regulations are based on 'One size fits all', the regulated entities can always align them to suit their SWOT and tap those appropriate business opportunities. The BM should be made flexible to tap the buoyancy in the economy. BM should fit the structural liquidity pattern and risk based pricing of assets and liability products for balanced growth and profitability to stay ahead in competition. Given increasing expectations from the banking sector, BM needs to be revamped and reinvented, driven by new tools of technology to explore the emerging opportunities for growth and cope with risks. Regulations and government policies are set to be more supportive to enable banks to enforce a high standard of governance, risk, and compliance for funding growth and ensuring financial stability. BM has to be re-engineered with vision and fortitude, laying a firm foundation for steady growth while exploring blue ocean strategies to reinvent growth. Facebook Twitter Linkedin Email Disclaimer Views expressed above are the author's own.
