July 30: Corporate India was hoping for a rate cut in order to revive the investment cycle, but what lies ahead for India Inc as RBI tightens liquidity to rescue the rupee? Advent Advisors’ K.R. Bharat says the RBI unable to single-handedly revive investment cycle. Bank of Baroda’s P. Srinivas and Mecklai Financial Services’ Partha Bhattacharyya also share their views on the rate outlook.
July 30: In its monetary policy meeting today, the RBI kept repo rates and CRR unchanged and cut the GDP growth forecast to 5.5% from 5.7%. Top bankers, including Punjab National Bank’s K.R. Kamath, ICICI Bank’s Chanda Kochhar and SBI’s Pratip Chaudhuri share their views on the decision.
July 30: RBI Governor D. Subbarao says there were two considerations behind today’s policy decision: external sector developments and the balance between slowing growth and inflation risks. The growth forecast downgrade was based on underperforming industry and services sectors though the agricultural sector is gaining on the back of a good monsoon, he adds.
July 30: RBI Governor D. Subbarao speaks about the central bank’s expectations for the currency. “We remain committed to curbing volatility in the foreign exchange rate,” he says, adding that the RBI is not targeting any level for the rupee. However, he refused to comment on the possibility of more tightening measures.
July 30: RBI Governor D. Subbarao explains the rationale behind the central bank’s liquidity tightening measures. “The idea was making liquidity scarcer and more costly, so modulating access to LAF was the most efficient way to curb rupee volatility,” he says. He also spoke about the impact on banks and the possibility of their raising rates.
July 30: RBI Governor D. Subbarao refuses to comment on the timing and kind of measures likely should the rupee worsen further. “We need to diagnose and prescribe dosage depending on the situation at hand,” he says. Subbarao also speaks about structural measures to contain instead of just financing the current account deficit.
July 30: While keeping repo rates and CRR unchanged, the RBI says it will withdraw tightening as rupee steadies. The central bank is worried about the macroeconomic situation, says Ajay Mahajan, Managing Partner at R-Square Advisors. “The need to help rupee shows RBI is in an ‘impossible trinity trilemma’,” he adds.
July 30: The RBI policy announcement spurred a market reversal as bonds yields rose, equity markets erased gains and rupee weakened. Axis Bank’s Saugata Bhattacharya says markets have taken into account future moves. Meanwhile, Tata Group’s Siddhartha Roy says, “If we cannot expect anything much from the future, it’s unlikely RBI will roll back its measures.”
July 30: As indicated by the Bloomberg poll, the Reserve Bank of India has kept rates unchanged in its policy meeting today. Axis Bank’s Saugata Bhattacharya says, “If the rupee stays at the same levels for a month there is a chance the RBI will roll back tightening.”
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