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Business Standard
5 days ago
- Business
- Business Standard
RBI MPC meet: What stayed the same, what changed in August policy review
RBI's Monetary Policy Committee meeting today kept interest rates unchanged, lowered FY26 inflation forecast to 3.1 per cent, and CRR cut to begin in September 2025 New Delhi The Reserve Bank of India's Monetary Policy Committee (MPC) at its meeting concluded on August 6 decided to keep all key policy rates unchanged, following significant changes in earlier meetings this year. RBI MPC: What remains the same • The policy repo rate remains unchanged at 5.50 per cent, following a 50 basis point (bps) cut in the previous (June 2025) meeting • The MPC retained its policy stance as 'neutral' • The Standing Deposit Facility (SDF) rate remained unchanged at 5.25 per cent, and the Marginal Standing Facility (MSF) rate and bank rate stayed unchanged at 5.75 per cent during the August 2025 RBI MPC meeting • The RBI retained its real gross domestic product (GDP) growth forecast for FY26 at 6.5 per cent RBI MPC meet: What has changed CRR cut begins in September The RBI confirmed that the cut in the cash reserve ratio (CRR), announced in June, will begin from September 2025. RBI Governor Sanjay Malhotra said the move aims to maintain enough liquidity in banks to boost credit growth and keep financial markets stable. The central bank will keep policy rates unchanged so that earlier rate cuts can have their full effect. In June, the RBI decided to reduce the CRR from 4 per cent to 3 per cent of net demand and time liabilities (NDTL), in four steps of 25 basis points each, starting on September 6. Malhotra said India's banking sector remains strong, with good capital, liquidity, and profitability levels. Commercial banks have a Capital to Risk (Weighted) Assets Ratio (CRAR) of 17 per cent, net interest margin of 3.5 per cent, liquidity at 132 per cent, and a credit-deposit ratio of 78.9 per cent. Bank credit grew by 12.1 per cent in 2024-25. While this is slower than the 16.3 per cent growth seen in 2023-24, it is still above the 10-year average of 10.3 per cent. RBI MPC meet: Key rates Repo rate Previous MPC (June 2025): 5.50 per cent (after 50 bps cut) Current MPC (August 2025): 5.50 per cent (unchanged) CPI inflation Previous MPC (June 2025): 3.7 per cent projection for FY26 Current MPC (August 2025): 3.1 per cent projection for FY26 GDP growth Previous MPC (June 2025): 6.5 per cent projection for FY26 Current MPC (August 2025): 6.5 per cent projection for FY26 The quarterly inflation forecast stands as follows: Q2 FY26: 2.1 per cent, down from 3.4 per cent Q3 FY26: 3.1 per cent, down from 3.9 per cent Q4 FY26: Maintained at 4.4 per cent Q1 FY27: 4.9 per cent The quarterly GDP forecast stands as follows: Q2 FY26: 6.7 per cent Q3 FY26: 6.6 per cent Q4 FY26: 6.3 per cent
Mint
16-06-2025
- Business
- Mint
India cenbank seeks market views on aligning call money rate with repo, sources say
By Siddhi Nayak and Dharamraj Dhutia MUMBAI, - The Reserve Bank of India has sought feedback from large market participants on aligning the overnight interbank call money rate more closely with the policy repo rate, five treasury officials aware of the discussions told Reuters on Monday. The move follows a Reuters report last week that said the RBI wants the overnight call rate to broadly align with the policy repo rate and is considering steps to ensure that happens. The policy rate currently stands at 5.50%, while the overnight call rate averages 5.30% and the TREPS rate hovers near 5.20%. The overnight call rate and TREPS rate have averaged below the policy rate since April. A persistent gap between the RBI's operative rate and the policy rate typically signals that banks are accessing cheaper funding than what the central bank is comfortable with. The RBI spoke with large treasury officials on Friday to review liquidity conditions and understand why the overnight call rate — the operative policy target — has been persistently trailing the repo rate, two of the sources said. None of the sources wanted to be named because they are not authorised to speak to the media. The RBI did not immediately reply to a Reuters email seeking comment. The central bank is also keen to understand why treasury bill yields have spiked in the last week, the two sources added. The yield on 364-day notes was sharply higher than estimates last Wednesday. "The motive seemed to be to sensitise the market that a variable rate reverse repo auction would be in the offing," a senior official at a state-run bank said. The source had added that the RBI could start conducting variable rate reverse repo auctions to suck out surplus liquidity as and when required. The weighted average overnight call rate has remained well below the RBI's key repo rate and closer to the policy corridor's floor, the Standing Deposit Facility rate, for the past few weeks. On June 6, the RBI slashed its key policy rate by 50 basis points, but changed its stance to neutral, indicating limited room for further cuts. The RBI also announced a reduction in banks' cash reserve ratio by 100 basis points September onwards. The central bank also stopped conducting daily fund infusion through variable rate repo since June 11, which market took as an indication that the RBI may move towards VRRR soon. Market participants have requested that the RBI avoid shocks in liquidity management which would help avoid volatility in short-term rates, another treasury official said. "Given that the focus of monetary policy is on enhancing transmission, the expectation channel is equally important. Hence, it would be better to move overnight rates towards repo rate after some time, allowing transmission to gain pace," said Gaura Sen Gupta, chief economist with IDFC First Bank. This article was generated from an automated news agency feed without modifications to text.
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Business Standard
06-06-2025
- Business
- Business Standard
HDFC Bank, Bajaj Fin: Rate sensitive shares up on repo rate, CRR cut by RBI
Rate sensitive stocks after RBI MPC meeting Shares of rate sensitive sectors, such as financials including banks, non banking financial companies (NBFCs), housing finance companies; automobiles; and real estate rallied up to 7 per cent on the bourses in Friday's intraday trade after the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) reduced the benchmark repo rate by 50 basis points (bps) to 5.50 per cent. The cut in the repo rate, which is the rate at which central banks lend to commercial banks, usually against government securities, was accompanies by a 100-bps reduction in cash reserve ratio (CRR). Besides, the Standing Deposit Facility (SDF) rate is now reduced to 5.25 per cent, while the Marginal Standing Facility (MSF) rate stands at 5.75 per cent. The RBI has shifted its policy stance from 'accommodative' to 'neutral'. The RBI MPC announced a reduction in the CRR by 1 percentage point to 3 per cent of net demand and time liabilities (NDTL) in a staggered manner during the course of the year. The CRR is the percentage of a bank's total deposits that it must keep as reserves in cash with the central bank, ensuring liquidity and controlling inflation. "This reduction will be carried out in four equal tranches of 25 bps each with effect from the fortnights beginning September 6, October 4, November 1 and November 29, 2025. The cut in CRR would release primary liquidity of about ₹2.5 trillion to the banking system by December 2025. Besides providing durable liquidity, it will reduce the cost of funding of the banks, thereby helping in monetary policy transmission to the credit market," RBI Governor Sanjay Malhotra said in a statement. At 10:37 AM, the Nifty Bank, Nifty Financial Services, Nifty PSU Bank, Nifty Private Bank index, Nifty Auto, and Nifty Realty index were up in the range of 1 per cent to 2 per cent. In comparison, the Nifty 50 was up 0.47 per cent at 24,867.20. Share prices of Godrej Properties, DLF, Ajmera Realty & Infra India, Kolte-Patil Developers, Suntech Realty and Signatureglobal (India), from the real estate sector, were up in the range of 3 per cent to 7 per cent. Further, shares of Mahindra & Mahindra Financial Services, Equitas Small Finance Bank, Ujjivan Small Finance Bank, Fino Payments Bank, Bajaj Finance, Shriram Finance, IDFC First Bank, RBL Bank and Axis Bank, from the financials, up between 2 per cent and 4 per cent. Ashok Leyland, Minda Corp, Maruti Suzuki India, Hero MotoCorp, TVS Motor Company, Uno Minda and Bajaj Auto from the automobiles and its related companies are up in the range of 1 per cent to 3 per cent. "The higher-than-expected 50bp rate cut decision by the MPC, though positive for growth is slightly negative from the market perspective for the near-term. This big rate cut is, as the RBI Governor remarked, front-loading of the rate cut. The change in monetary stance from accommodative to neutral also indicates that more rate cuts are unlikely unless the situation warrants. This big rate cut will impact the margins of the banks and, therefore, bank stocks will be under pressure in the near-term. However, the credit growth that this rate cut will hopefully stimulate will compensate for the dip in margins" said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments. InCred Equities view on Banks The brokerage firm believes that impending repo rate cuts will further deteriorate core profitability at State-Owned Enterprises (SOE) banks. Large private banks are better placed to manage margins in this repo rate downcycle vs. SOE banks, given a) relatively better starting point of margins, b) ability to drive the mix shift towards higher-yielding products, c) lagged repo rate transmission on linked loans, and d) the benefit of savings deposit rate cut of 25bp taken so far vs. limited savings account or SA rate cuts seen at SOE banks. Among large private banks, the brokerage firm has an ADD rating on Axis Bank, HDFC Bank and ICICI Bank. "We believe HDFC Bank can outperform ICICI Bank over the next few years with broadly similar earnings growth trajectory and healthy deposit growth delivery. Among SOE banks, analysts said they would prefer stocks with healthy on-balance sheet liquidity and levers to offset margin compression at reasonable valuations. The brokerage firm has an ADD rating on Punjab National Bank (PNB) & Canara Bank. State Bank of India (SBI) & Bank of Baroda (BoB) are quality franchises among SOE banks, but their valuations made us to assign a HOLD rating to them," InCred Equities said in a banking sector update. Kotak Institutional Equities' view on Real Estate sector Residential real estate closed FY2025 with 1 billion sq. ft. of sales, down 3 per cent year-on-year (Y-o-Y), largely impacted by Hyderabad, which saw a 33 per cent (Y-o-Y) decline. The MMR (Mumbai Metropolitan Region) and Bengaluru were soft on volumes on account of slower launches, while the NCR (National Capital Region) continued its strong showing, with 47 per cent Y-o-Y growth in volume sales. Price trends remained strong across markets, aiding 10 per cent Y-o-Y growth in sales value. 'Valuations for most residential real estate stocks stand at 7-10x adjusted EV/ Ebitda (FY2026E) post some recovery in the stock prices. H2FY25 saw an improvement in sales following a weaker H1FY25; developers expect the momentum to continue. They have guided for double-digit pre-sales growth (20 per cent Y-o-Y in FY2026E for our coverage), aided by industry growth and market share gains,' Kotak Institutional Equities said in a sector report. The combined launch pipeline at 140 million sq. ft (+30 per cent Y-o-Y) has a potential GDV of ₹1.7 trillion, which should also support the momentum. Net debt for the listed developers has come off significantly over the past few years, aided by healthy cash generation as well as equity raises. Strong balance sheets would allow the companies to invest in new land parcels, aiding future growth. The brokerage firm said they remain constructive and prefer DLF, Brigade and Prestige at the current price points.
