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Business Standard
2 days ago
- Business
- Business Standard
RBI unperturbed by $52.4 bn short position in dollar forward book
The Reserve Bank of India is not overly concerned about short dollar positions in the forwards book, said Sanjay Malhotra, Governor, the Reserve Bank of India, at the post-policy press conference on Friday. The central bank's net short dollar position in the forward book stood at $52.4 billion by the end of April, down from a peak of $78 billion in February, according to the latest data by the RBI. A majority of the central bank's forward positions — around 72 per cent of the total book — were concentrated in the three-month to one-year segment, amounting to $37.7 billion. In comparison, forward contracts maturing within three months stood at $14.7 billion. 'About the $40 billion short positions, we are not unduly concerned about that. Even if you were to… include the one after one year that is coming in, we are not unduly worried. It's a very, very comfortable level to be in. Yes, if there are opportunities and we can build reserves, that will happen, but that is not something which we will be unduly, be bothered about,' said Malhotra. Following a five-month streak of rising net short dollar positions in the forwards book of the RBI through February, the central bank trimmed some of its dollar exposure in March and April. The RBI was likely allowing the short positions to mature while sterilising the resulting liquidity impact through Open Market Operations (OMOs). This, it was suggested, explained why the central bank continued to conduct OMOs even in times of surplus liquidity. 'With the RBI's net short FX forward book outstanding at $72.6 billion (end-April, including $20 billion worth of short FX forwards with ~3Y tenors), we believe active USD purchases are likely to continue in coming months to keep FX reserves unchanged, at a minimum. Based on the RBI's data, it has another $14.7 billion worth of short FX forwards expiring over the next three months; we estimate $7.4 billion in May, $4.8 billion in June and $2.5 billion in July,' Nomura said in a note.
India Gazette
2 days ago
- Business
- India Gazette
Economists hail RBI's 50 bps rate cut and CRR cut to give a strong push to growth
New Delhi [India], June 6 (ANI): Economists across the board have welcomed the Reserve Bank of India's (RBI) latest policy decision, terming the 50 basis points (bps) repo rate cut as a pro-growth move that is expected to significantly boost liquidity and economic activity in the country. On Friday, RBI Governor Sanjay Malhotra announced the decision of the Monetary Policy Committee (MPC), stating that the policy repo rate has been reduced from 6 per cent 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. Reacting to the development, Sonal Badhan, Economics Specialist at Bank of Baroda, told ANI that the policy is strongly pro-growth. 'RBI has announced a very pro-growth policy by announcing a 50bps repo rate cut. This along with 100 bps cut in CRR will provide significant boost to liquidity and lead to faster transmission of rate cuts,' she said. However, Badhan also noted a cautious tone in RBI's outlook. 'As the stance has been changed to neutral and the policy signals that there remains limited room for monetary policy to support growth, we expect status quo by RBI in the next 2-3 meetings. The decision will be data dependent. More rate cuts will be expected if there is significant downside seen to growth,' she added. Debopam Chaudhuri, Chief Economist at Piramal Group, said the RBI's move was in line with their expectations. 'While we were among the few institutions anticipating a 50 bps rate cut, it is highly encouraging to see MPC members aligning with this view, united by the objective of revitalizing India's domestic economic growth,' he told ANI. Chaudhuri pointed out that the February rate cut had limited impact due to tight liquidity. 'The additional 25 bps cut now helps offset that earlier lag in impact,' he said, adding that another 50 bps cut may follow in FY26, possibly bringing the terminal repo rate down to 5 per cent. He also expects a moderation in the RBI's liquidity operations via Variable Rate Repos (VRRs) and Open Market Operations (OMOs) as the CRR cut ensures sufficient liquidity. Sujan Hajra, Chief Economist and Executive Director at Anand Rathi, said the rate and CRR cuts exceeded both market and institutional expectations. 'This frontloading of monetary easing reflects a clear intent to support growth while inflation remains benign,' Hajra said. However, Hajra cautioned about the shift in policy stance. 'Although this change from 'accommodative' to 'neutral' might be read as a signal that the rate cut cycle is nearing its end, we believe it is aimed at tempering any potential 'irrational exuberance' in the financial markets,' he added. With inflation currently under control, the RBI's bold policy shift has boosted market confidence and underlined its commitment to supporting economic growth while maintaining macroeconomic stability. (ANI)
Express Tribune
24-05-2025
- Business
- Express Tribune
SBP injects record Rs12.82 trillion
Listen to article In an unprecedented move to help fund the government's fiscal deficit, the State Bank of Pakistan (SBP) injected a record-breaking Rs12.82 trillion into the banking system on Thursday through Open Market Operations (OMOs), marking one of the largest liquidity injections in recent history. Of the total injection, Rs12.42 trillion was provided via conventional reverse repo OMOs. This included Rs11.9 trillion through 21-day loans at an interest rate of 11.03%, and Rs521.1 billion through 7-day loans at 11.10%. An additional Rs396 billion was injected using Shariah-compliant Mudarabah-based OMOs, reflecting the SBP's strategy to cater to liquidity needs in both conventional and Islamic banking sectors. Since the International Monetary Fund (IMF) restricts the government from borrowing directly from the central bank, SBP injects liquidity into commercial banks, which then invest this capital into government treasury instruments, effectively financing the fiscal deficit indirectly, according to sources familiar with the matter. A revenue shortfall by the Federal Board of Revenue (FBR) is contributing to the funding gap, with actual collections hovering around Rs11.8 trillion against the FY2025 target of Rs12.3 trillion, said Sana Tawfik, Head of Research at Arif Habib Limited (AHL). She added that SBP profits of Rs2.5 trillion have already been transferred to the Ministry of Finance in the first nine months of FY2025 as non-tax revenue, while the petroleum levy brought in Rs833 billion during the same period. Meanwhile, the Pakistani rupee gained marginally against the US dollar on Friday, appreciating 0.03% to close at 281.97 in the inter-bank market, up from 282.06 a day earlier. Gold prices surged in domestic markets in line with global trends as geopolitical risks increased. According to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA), gold per tola jumped Rs3,500 to Rs351,000, while the 10-gram rate increased by Rs3,000 to Rs300,925. Globally, gold prices rallied 2% on Friday, heading for their best weekly performance in six weeks. This rise was triggered by investor anxiety following US President Donald Trump's renewed threats of imposing steep tariffs, including a 50% levy on European goods, and warning Apple Inc. of further tariffs unless it shifted manufacturing to the US. "Gold is up today due to strong safe-haven demand," said Adnan Agar, Director at Interactive Commodities. He noted international gold prices hit a high of $3,364 and hovered around $3,361 per ounce during trading. The market opened at $3,300 and touched a low of $3,286 earlier in the session.
India Gazette
17-05-2025
- Business
- India Gazette
RBI expected to transfer record dividend of Rs 2.7 to 3 lakh cr to govt in FY26: Report
New Delhi [India], May 17 (ANI): The RBI is expected to transfer a record surplus dividend of Rs 2.7 lakh crore to Rs 3 lakh crore to the govt in FY26, an almost 50 per cent increase YoY, highlighted a report by Front Wave Research, a SEBI-registered Research Analyst. This would mark a sharp rise from last year's historic Rs 2.1 lakh crore transfer, and could significantly impact India's fiscal position and liquidity conditions in the coming months. The dividend is likely to be announced by late May. The report said 'The RBI is expected to transfer a record surplus to the government in FY26, with estimates ranging from Rs 2.7 lakh crore to Rs 3 lakh crore'. The report expected surge in surplus transfer is driven by three major factors. First, the RBI's timely forex market operations generated strong trading gains. The central bank bought US dollars at around Rs 83-84 and sold them at Rs 84-87, locking in notable profits. Second, the RBI's over USD 600 billion in foreign exchange reserves earned higher interest income due to elevated global rates. This added significantly to the central bank's surplus. Third, on the domestic front, the RBI earned solid income through Open Market Operations (OMOs), bond holdings, and repo transactions. These helped strengthen its balance sheet and further raised the size of the surplus available for transfer. The report also highlighted that when these funds are paid and spent, banking system liquidity could rise sharply, potentially touching Rs 5.5-6 trillion. This would be a huge turnaround from the recent liquidity deficit. It said 'Once the dividend is paid and spent, banking system liquidity could climb to Rs 5.5-6 trillion, up from a recent deficit'. The bond market has already started reacting. The yield on the 10-year government bond has fallen to 6.23 per cent and may decline further as markets price in the expected liquidity surge. Short-term yields are dropping even faster, leading to a steepening of the yield curve, often seen as a sign of possible rate cuts. Sectors like PSU banks, NBFCs, infrastructure, and consumption are already seeing positive momentum. If the record dividend is confirmed, it may act as a stealth stimulus and support economic growth through FY26. (ANI)
Time of India
05-05-2025
- Business
- Time of India
SBI predicts inflation falling below 3% in Q1 FY26, forecasts 125 bps RBI rate cut going forward
NEW DELHI: India's largest lender, the State Bank of India (SBI), expects retail inflation to drop below 3% in the first quarter of FY26 and is projecting aggressive rate cuts by the Reserve Bank of India (RBI) totalling up to 125 basis points this fiscal citing a research note. 'We expect rate cuts of 75 basis points in June and August (H1) and another 50 bps cut in H2 i.e. cumulative cuts of 125 bps going forward,' said the SBI Research report. The bank also sees room for cuts of up to 150 bps in a best-case scenario, citing a 'Goldilocks period' of low inflation and moderate GDP growth. Retail inflation, measured by the Consumer Price Index (CPI), fell to a 67-month low of 3.34% in March 2025—largely due to a sharp decline in food prices. 'The sharp moderation in CPI inflation, hitting a 67-month low of 3.34 per cent in Mar'25 due to sharp correction in food inflation bodes well for lowering the average CPI headline forecast for FY26 below 4 per cent now (with below 3 per cent in Q1FY26),' said the report. Core inflation, which excludes food and fuel, also witnessed movement, rising from 3.28% in August 2024 to 4.1% by March 2025, the highest in 15 months, driven largely by a surge in gold prices amid global uncertainties. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Best website creation site | Build your store in minutes Shopify Shop Now Undo However, when excluding gold, core inflation stood at just 3.2%. SBI expects FY26 average headline inflation to be between 3.7% and 3.8%, assuming no major food price shocks or heatwaves. Core inflation, including gold, is projected in the 4.0%–4.3% range. The report also suggests that the central bank's policy rate could even fall below the neutral rate by March 2026. A front-loaded 50 bps cut, it adds, could act as a strong policy signal from the RBI. However, SBI flagged risks to the credit-deposit balance if deposit rates fall sharply, potentially coinciding with subdued deposit growth. On the liquidity front, it anticipates no shocks, aided by Open Market Operations (OMOs) and a strong dividend transfer, which could push yields closer to 6% with a downward bias. Nominal GDP growth for FY26 is estimated between 9% and 9.5%, slightly below the Union Budget's 10% projection, further reinforcing SBI's view that conditions are ideal for monetary easing. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
