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Time of India
a day ago
- Business
- Time of India
Rate-sensitive sectors like banking, NBFCs, real estate and automobile to gain amid easing rates: Report
Sectors such as banking, NBFCs, real estate, and automobiles are expected to be the key beneficiaries of the current easing interest rate environment, according to a report by Nexedge Research. The report mentioned that with borrowing costs on a downward trend, these rate-sensitive segments are likely to witness stronger credit flow, lower financing costs, and improved demand conditions. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like When the Camera Clicked at the Worst Possible Time Read More It said, "Banking, NBFCs, real estate, and automobiles are well positioned to benefit from lower borrowing costs." The report also noted that the Indian economy is entering a phase marked by benign inflation and ample liquidity, creating a sustained low-interest rate backdrop. This is already evident in the falling money market rates and a notable softening in the 10-year government bond yield. The report mentioned that the decline in yields has boosted bond prices and improved return prospects for fixed-income investors. Live Events It said, "Money market rates and bond yields are trending lower, with the 10-year G-sec yield already softening, boosting bond prices and supporting fixed-income returns." The report highlighted that inflation is currently hovering near the lower end of the Reserve Bank of India's (RBI) target range of 2-6 per cent. With the RBI maintaining a neutral policy stance, the market is beginning to price in the possibility of further rate cuts. This combination of falling inflation and proactive monetary easing is seen as supportive for both equity and bond markets. The report suggested that these factors together are strengthening the medium-term macro outlook, offering a positive backdrop for investors and further momentum for India's economic growth. The RBI's Monetary Policy Committee on Friday cut the repo rate by 50 basis points to 5.50 per cent (from 6.00 per cent). This larger-than-expected cut marks the third consecutive reduction in 2025, totalling 100 bps of easing since February. Consequently, the Standing Deposit Facility (SDF) rate stands adjusted at 5.25 per cent, and the Marginal Standing Facility (MSF) rate and Bank Rate are set at 5.75 per cent. The RBI has also reduced CRR by 100 bps (from 4 per cent down to 3 per cent) to augment durable liquidity in the banking system. This CRR cut will be implemented in phases beginning September 6, October 4, November 1 and November 29, 2025, and is expected to release roughly Rs 2.5 trillion of liquidity by November 2025, bolstering bank lending capacity.
India Today
2 days ago
- Business
- India Today
5 Key Takeaways From June 2025 RBI Policy Meeting
5 Key Takeaways From June 2025 RBI Policy Meeting 6 Jun, 2025 Credit: Reuters The RBI cuts repo rate to 5.5% from 6%, making loans, especially home and personal loans,potentially cheaper if banks pass on the benefit to borrowers. Credit: Getty REPO RATE REDUCTION RBI eases the Standing Deposit Facility (SDF) to 5.25%, the Marginal Standing Facility (MSF) and Bank Rate to 5.75%, aiming to smooth short-term bank liquidity. OTHER KEY RATES ALSO ADJUSTED The central bank expects India's GDP to grow 6.5% in FY26, backed by strong rural demand and rising investments in infrastructure. GDP GROWTH FORECAST RBI shifts from 'accommodative' to 'neutral' stance, meaning it will now be more cautious and will wait and watch before making further changes. Credit: AFP SHIFT TO NEUTRAL STANCE Assuming normal rainfall, the RBI now expects inflation to be 2.9% in Q1 (April–June), 3.4% in Q2 (July–September), 3.9% in Q3 (October–December), and 4.4% in Q4 (January–March). INFLATION FORECAST
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Business Standard
2 days ago
- Business
- Business Standard
5 key takeaways from RBI MPC June meet: Rate cut, CRR, inflation and more
RBI MPC's latest decisions come amid easing inflationary pressures and continued challenges to economic growth. Here are the highlights from the central bank's June policy meet Vasudha Mukherjee New Delhi The Reserve Bank of India (RBI) Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, concluded its 55th meeting on June 6, announcing a major 50 basis point cut in the key policy repo rate to 5.5 per cent. The committee also shifted its policy stance from 'accommodative' to 'neutral' and revised its inflation outlook downwards for FY26. The latest decisions come amid easing inflationary pressures and continued challenges to economic growth. The majority of MPC members supported the 50 bps cut, while one member, Saugata Bhattacharya, backed a smaller 25 bps reduction. RBI monetary policy meeting june 2025 key takeaways 1: Repo rate cut by 50 bps The policy repo rate was reduced by 50 basis points to 5.5 per cent, with immediate effect. Consequently, the Standing Deposit Facility (SDF) rate now stands at 5.25 per cent, while both the Marginal Standing Facility (MSF) rate and the Bank Rate have been adjusted to 5.75 per cent. The MPC cited softening inflation and the need to support private consumption and investment as key reasons for front-loading the rate cut. While a rate cut had been expected after the RBI shifted its stance to accommodative in the April meeting, experts had anticipated a 25-basis point cut, as the RBI had done in the previous two meetings. 2: Change in policy stance to 'Neutral' Alongside the rate cut, the MPC changed its policy stance to neutral from accommodative. The committee said that with limited space left for further monetary easing, it will now adopt a data-dependent approach to ensure a balanced response to evolving inflation and growth dynamics. 3: Inflation forecast lowered The headline CPI inflation for FY26 is now projected at 3.7 per cent, revised down from the earlier forecast of 4 per cent made in April 2025. This outlook assumes a normal monsoon and is supported by moderating food inflation, contained core inflation, and softening global commodity prices. 4: GDP growth projection maintained at 6.5 per cent The RBI has maintained its real GDP growth forecast for FY26 at 6.5 per cent. This is based on sustained momentum in private consumption, investment, and services sector activity, despite global uncertainties. 5: Cash Reserve Ratio lowered to 3 per cent Following the MPC meet, the RBI announced a 100 basis point reduction in the Cash Reserve Ratio (CRR), lowering it to 3 per cent from 4 per cent. This reduction was aimed at enhancing liquidity in the banking system and improving the transmission of monetary policy. The reduction will be implemented in four equal tranches of 25 basis points each, commencing from September 6, 2025, and concluding on November 29, 2025. This phased approach is expected to inject approximately ₹2.5 trillion into the banking system by the end of November 2025. Growth stable, inflation eases The MPC noted that while growth remains 'lower than aspirations', inflation has significantly eased from above the upper tolerance band in late 2024 to well below the target by April 2025. The committee emphasised the need to support domestic growth through policy tools amid heightened global uncertainty. The next meeting is scheduled from August 4 to 6, 2025.
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.
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Business Standard
21-04-2025
- Business
- Business Standard
Liquidity coverage ratio: RBI mandates 2.5% additional run-off factor
In relief to banks, the Reserve Bank of India (RBI) has mandated a 2.5 per cent additional run-off factor for retail deposits linked to internet and mobile banking (IMB) facilities for commercial banks in its final guidelines for computation of the Liquidity Coverage Ratio (LCR), as compared to 5 per cent proposed in the draft norms issued in July 2024. In addition, funding from non-financial entities like trusts (educational, charitable and religious), partnerships, LLPs, etc. will attract a lower run-off rate of 40 per cent as against 100 per cent currently. The impact on banks' LCR – which they need to maintain at 100 per cent – will be much lower as compared to what the draft norms had proposed. These final norms, applicable to all commercial banks, excluding payments banks, regional rural banks and local area banks, will come into effect from April 1, 2026. 'These amendments would help improve the liquidity resilience of banks in India and would further align the guidelines with global standards while ensuring that such an enhancement is done in a non-disruptive manner,' the regulator said while announcing the norms. According to the final norms, stable retail deposits enabled with internet and mobile banking (IMB) shall have a 7.5 per cent run-off factor and less stable deposits enabled with IMB shall have a 12.5 per cent run-off factor, as against 5 and 10 per cent, respectively, prescribed currently. The total run-off factor will be 20 per cent as compared to 15 per cent now. The final norms were issued after receiving feedback on the draft proposal. Banks had opposed such a stiff increase in the additional run-off factor. The run-off factor acts as a cushion against sudden withdrawal of deposits. 'With an estimated level of 50–70 per cent of the impacted deposits, we estimated an adverse impact of 14–17 per cent on the reported LCR based on the draft guidelines. With the final guidelines, ICRA expects the adverse impact on the reported LCR to be lower at 9–11 per cent for the banking system,' said Anil Gupta, senior vice-president and co-group head, financial sector ratings, ICRA. 'The adverse impact could be partially offset by the lower run-off factor on certain deposits from non-banking financial entities like trusts, partnerships, LLPs. With sufficient timeline for implementation of these final guidelines, banks can position their balance sheets suitably to mitigate the impact on their LCRs by focusing on retail deposits or shoring up high-quality liquid assets (HQLAs),' Gupta added. The norms further said Level 1 high-quality liquid assets (HQLAs) in the form of government securities shall be valued at an amount not greater than their current market value, adjusted for applicable haircuts in line with the margin requirements under the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF). The central bank has been taking a series of measures to ease the liquidity situation for banks in the last few months, and the relaxation of the final LCR norms, as compared to the draft norms, further provides liquidity relief to the banks, which is expected to boost lending.
