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    RBI Monetary Policy Update

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    Angel Broking
    The Reserve Bank of India cut the Cash Reserve Ratio by 25 basis points to 4.5% while keeping key interest rates unchanged. This will inject about Rs. 17,000 crores into the banking system. Inflation remains the central bank's primary focus. While the CRR cut may boost the economy by enabling lower lending rates, inflation and fiscal and current account deficits still pose risks to growth.

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    RBI Monetary Policy Update

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    Angel Broking
    31 views4 pages
    The Reserve Bank of India cut the Cash Reserve Ratio by 25 basis points to 4.5% while keeping key interest rates unchanged. This will inject about Rs. 17,000 crores into the banking system. Inflation remains the central bank's primary focus. While the CRR cut may boost the economy by enabling lower lending rates, inflation and fiscal and current account deficits still pose risks to growth.

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    The Reserve Bank of India cut the Cash Reserve Ratio by 25 basis points to 4.5% while keeping key interest rates unchanged. This will inject about Rs. 17,000 crores into the banking system. Inflation remains the central bank's primary focus. While the CRR cut may boost the economy by enabling lower lending rates, inflation and fiscal and current account deficits still pose risks to growth.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    31 views4 pages

    RBI Monetary Policy Update

    Uploaded by

    Angel Broking
    The Reserve Bank of India cut the Cash Reserve Ratio by 25 basis points to 4.5% while keeping key interest rates unchanged. This will inject about Rs. 17,000 crores into the banking system. Inflation remains the central bank's primary focus. While the CRR cut may boost the economy by enabling lower lending rates, inflation and fiscal and current account deficits still pose risks to growth.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    RBI Monetary Policy Update

    Monday| September 17, 2012

    Content
    Overview RBI Monetary policy update Impact

    Overview This months rally in gold prices above the $1900/oz mark is indicative of structural problems and difficulties at the global economic level. Investors flocked to gold as a safe-haven investment, leading it to touch all-time highs almost every-day. The recent (last 2-3 days) decline in gold prices is partly due to profit-booking at higher levels coupled with expectations of further stimulus measures by Federal Reserve Chairman Bern Bernanke at the Jackson Hole Symposium. On the back of these positive expectations, markets are witnessing a bit of stability, and further trend in the global financial markets would be based on the outcome of the decisions taken by the policymakers and central bankers at this symposium.

    Nalini Rao - Sr. Research Analyst nalini.rao@angelbroking.com (022) 3935 8135


    Angel Commodities Broking Pvt. Ltd. Registered Office: G-1, Ackruti Trade Centre, Rd. No. 7, MIDC, Andheri (E), Mumbai - 400 093. Corporate Office: 6th Floor, Ackruti Star, MIDC, Andheri (E), Mumbai - 400 093. Tel: (022) 2921 2000 MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302
    Disclaimer: The information and opinions contained in the document have been compiled from sources believed to be reliable. The company does not warrant its accuracy, completeness and correctness. The document is not, and should not be construed as an offer to sell or solicitation to buy any commodities. This document may not be reproduced, distributed or published, in whole or in part, by any recipient hereof for any purpose without prior permission from Angel Commodities Broking (P) Ltd. Your feedback is appreciated on commodities@angelbroking.com

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    www.angelcommodities.com

    RBI Monetary Policy Update


    Monday| September 17, 2012

    Reserve Bank of India credit policy review September 2012 Key points: CRR cut by 25 basis points to 4.5 percent Key interest rates kept unchanged at 8 percent Primary focus of the monetary policy remains fighting inflation

    The Reserve bank of India (RBI) cuts the Cash Reserve Ratio (CRR) by 25 basis points to 4.5 percent. The CRR is the share of deposits the banks need to keep with the Central Bank. This rate cut would infuse about Rs. 17,000 crores of liquidity in the banking system. The central bank also kept interest rates unchanged and stated that its primary focus of monetary policy would be to fight inflation. The policy action could pave way for high inflation. The decision by the RBI saw the rupee and bond prices weakening with 10 year bond yield rising 5 basis points to 8.17 percent. On September 13, 2012, the government of India had announced policy measures to boost the economic growth and improve the fiscal position of the nation. It announced measures to allow foreign direct investment in industries including supermarkets and airlines. In its first monetary policy review for the financial year 2013, the central bank kept the policy rates unchanged. The RBI kept repo rate at 8 percent and CRR at 4.75 percent. Subsequently, the reverse repo rate, which is used to absorb excess liquidity from the banks remains at 7 percent. The RBI had slashed the SLR by 100 bps to 23 percent Reasons for and against rate cut: The GDP growth in the second quarter of 2012 grew at a modest pace of 5.5 percent as compared to 5.3 percent in the first quarter. Index of Industrial Production (IIP) also followed the trend thus rising to a meager 0.1 percent in July 2012 as compared a negative growth in the previous month. And so does the manufacturing Purchasing Managers Index (PMI) which showed a decline in the month of August 2012 and stood at 52.8 levels. The wholesale price index (WPI) rose to 7.55 percent in August 2012 as compared to the previous year, Page

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    mainly on account of high food prices.

    www.angelcommodities.com

    RBI Monetary Policy Update


    Monday| September 17, 2012

    The major ratings agencies -Standard & Poor's and Fitch have put the countrys sovereign credit rating on the watch on the account of poor economic growth, high fiscal and current account deficit and lack of policy actions from the government.

    GDP growth (%)

    IIP growth (%)

    Source : Reuters

    Manufacturing PMI 2012

    Inflation (%)

    Source: Reuters

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    RBI Monetary Policy Update


    Monday| September 17, 2012

    Current Account Deficit as % GDP

    Source: trading economics

    The decision of RBI would have positive impact on the economy and thereon boost confidence amongst market participants. A cut in CRR would enable banks to cut lending rates and this step would ensure adequate credit flow to the productive sectors of the economy. However, the country still faces persistent inflationary pressures along with current account deficit and fiscal deficit which could be a risk to the growth of the economy.

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