When will we see the next policy rate cut by the Reserve Bank of India (RBI)? The nation’s commercial banks have the answer. As expected, the first bi-monthly policy statement of the central bank, released on Tuesday, maintained status quo in terms of rates, banks’ cash reserve ratio (CRR) as well as mandatory government bondholding, but after two wasted rate cuts, RBI could force the banks to bring down their loan rates by lobbing the ball in their court. Unless they lower their loan rates, the central bank will not cut its policy rate.
Bank credit growth dropped to an 18-year low in the year ended 31 March. Indeed, there aren’t too many fresh investment proposals by Indian companies, but that’s just one side of the story. The other side is banks’ reluctance to lend for fear of piling up bad assets.
The Reserve Bank of India (RBI) has redefined priority sector loan norms which stipulate that banks operating in India must offer 40% of all loans to farmers, small entrepreneurs and so-called weaker sections of society. Almost half of these priority loans must flow to agriculture. Two critical changes have been made.
There is nothing official about it, but the so-called memorandum of understanding that the nation’s largest lender State Bank of India (SBI) had signed with Gujarat’s Adani Group in November 2014 to build a $7.8 billion coal mine in Australia has died a natural death. Neither the lender nor the borrower is keen to follow up the agreement that raked up a huge controversy after it was announced in Brisbane where Adani Group boss Gautam Adani was accompanying a business delegation for the Group of 20 summit, attended by India’s Prime Minister Narendra Modi.
India’s central bank has completed 80 years. At a function in Mumbai on 2 April, the Reserve Bank of India’s (RBI) 23rd governor, Raghuram Rajan, dwelt on the significance of the anniversary, referring to the south Indian tradition of Sadabhishekam, where one celebrates 80 years after seeing the full moon 1,000 times. Prime Minister Narendra Modi too found the occasion special as the RBI has been blessed with Sahasra Chandra Darshan.
The average consumer price inflation in India in fiscal year 2015-16, according to most analysts, will be in the range of 5.25-5.5%, at least 50 basis points lower than the Reserve Bank of India’s (RBI) 6% target for January 2016.