RBI intends to bring excess liquidity to neutral position : 7 Apr 2017

reserve-bank-of-india

TACKLING SURPLUS CASH

Using conventional and unconventional instruments, the Reserve Bank of India intends to bring excess liquidity to the neutral position. These measures will ensure the surplus does not stoke inflation. In a separate move, the central bank also allowed banks to invest in REITs and InvITs.

Problem of plenty

“RBI will use SDF after amendments have been made to the RBI Act. This will give the regulator more flexibility to manage its liquidity operations.
It expects liquidity conditions to remain in surplus in the short run. Remonetisation accelerated in Jan-Mar with currency in circulation increasing cumulatively by about Rs 4,37,300 cr in the fourth quarter,” said Siddhartha Sanyal, Chief Economist, Barclays.

RBI to stay cautious

RBI maintaining status quo on the repo rate was expected, while surprising with narrowing the policy rate corridor further to plus or minus 25 basis
points (bps) around the repo rate (from the hitherto plus or minus 50bps). While the headline reverse repo rate inched higher with the current move,
it is important not to interpret it as an uptick in the policy rate cohort.

RBI’s digital boost

Aimed at encouraging digital transactions, RBI said it would soon come out with final guidelines on merchant discount rate (MDR) charges on debit card payments. Pending the final guidelines, the existing norms for MDR charges would continue beyond March 31.

Urjit Patel on inflation:

‘Inflation is elevated compared to where we want it to be’

For 2017-18, inflation is projected to average 4.5 per cent for the first half and five per cent in the second half, with risks balanced around the inflation trajectory. The committee took note of the reduction in bank lending rates but saw further scope for more complete transmission, including for small savings and administered rates.

RBI on NPA pain

The Reserve Bank of India (RBI) on Thursday said even though there had been a few positives on the bad loans front, the current level of dud loan resolution was untenable as there had been a deterioration in non-performing assets (NPA), and promised new measures to tackle the pain. “The present level of NPA resolution is untenable,” Governor Urjit Patel said while addressing the media after announcing the first bi-monthly policy for financial year 2017-18.

BS Jury on RBI Bi-monthly monetary policy 2017-18

“The decision to keep the repo rate unchanged was an expected move. The Reserve Bank of India (RBI) is adopting a wait-and-watch approach in assessing the direction of inflation. Benign global conditions and stable oil prices could be offset by higher food prices in the coming months because of El Niño and larger government spending.” Keki Mistry, Vice-Chairman & CEO, HDFC .

Realty stocks surge

Realty stocks surged on Thursday after the Reserve Bank of India (RBI) allowed domestic lenders to invest in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs). Despite volatility in the broader market, the BSE Realty, a gauge for the performance of real estate stocks, gained two per cent, the most among sectoral indices. Shares of DLF, which is planning to launch a REIT soon, surged 4.5 per cent. Shares of
Unitech and Prestige went up 3.25 per cent and 1.92 per cent, respectively.

REITs, InvITs

RBI’s move to allow banks to invest in Real Estate Investment Trusts (REITs) and Infrastructure Investment Funds (InvITs) might not find many takers, if experts are to be believed. Currently, banks can invest in instruments such as mutual fund schemes, venture capital funds and equities to the extent of 20 per cent of their net owned funds. This limit will now include REITs and InvITs.

Capitalstars Financial Research Private Limited is a research house and an investment advisory carrying out operations in the Indian Equities and Commodity market.We also provide 2 days free trial to our client.Join our services and trade with us.

GET MORE DETAILS HERE:-

Commodity Market Tips
Equity Tips
Nifty Future Tips

 

  * INVESTMENT & TRADING IN SECURITIES MARKET IS ALWAYS SUBJECTED TO MARKET RISKS, PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE PERFORMANCE.
* CAPITALSTARS INVESTMENT ADVISER: SEBI REGISTRATION NUMBER: INA000001647
Advertisements