Tag Wise Current Affairs
Tag: Monetary Policy & RBI
Forex reserves rises to $405.6 billion in March 2019
Tags: Monetary Policy & RBI
Published on: 23 March 2019
Monetary Policy: RBI cuts repo rate by 25 bps to 6%
Tags: Monetary Policy & RBI
Published on: 04 April 2019
RBI first APAC central bank to begin interest rate easing cycle: Fitch
Tags: Monetary Policy & RBI
Published on: 27 April 2019
Monetary Policy: RBI cuts repo rate by 25 bps to 5.75%
Tags: Monetary Policy & RBI
Published on: 07 June 2019
RBI scraps charges on NEFT and RTGS Transfers
Tags: Monetary Policy & RBI, Banking Schemes & Policies
Published on: 07 June 2019
RBI announced 35 basis points (bps) cut in repo rate
Tags: Monetary Policy & RBI
Published on: 08 August 2019
Banks’ exposure limits, lending norms eased for stressed NBFCs
Tags: Monetary Policy & RBI
Published on: 08 August 2019
Usha Thorat panel suggests liberal currency market for offshore users
Tags: Monetary Policy & RBI
Published on: 09 August 2019
RBI to link loan EMI to external benchmarks
Tags: Monetary Policy & RBI
Published on: 07 September 2019
RBI panel to assess adequacy of Forex reserves
Tags: Monetary Policy & RBI
Published on: 10 September 2019
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'title' => 'Forex reserves rises to $405.6 billion in March 2019',
'description' => '<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">According to the Reserve Bank of India (RBI), India's foreign exchange (forex) reserves surged by $3.602 billion to $405.638 billion in week to March 15, 2019. The surge was driven by rise in foreign currency assets, a major component of the overall reserves.</span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Reasons for increase</span></strong></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">The increase in forex reserves could partly be attributed to rising investments by foreign investors in Indian capital markets. The net foreign portfolio investment (FPI) in equity markets in till March 15, 2019 was $2.9 billion, highest since January 2018. Indian debt markets also have seen positive inflow of $1.2 billion till March 15, 2019.</span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Forex Reserves in March 2019</span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Foreign currency assets (FCA): </span></strong><span style="font-family:"Quicksand",serif">Increased by $3.546 billion to $377.773 billion.</span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Gold reserves: It rose by $38.9 million to $23.408 billion.</span></strong></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Special drawing rights (SDRs) with International Monetary Fund (IMF): </span></strong><span style="font-family:"Quicksand",serif">It rose by $5.9 million to $1.461 billion.</span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">RBI’s reserve position with IMF: </span></strong><span style="font-family:"Quicksand",serif">It increased by $12.1 million to $2.995 billion.</span></span></span></li>
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<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Forex Reserves </span></strong></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">They are reserve assets held by central bank of the country in foreign currencies. These reserve acts as buffer to be used in challenging times. They are also used as back liabilities and also to influence monetary policy. Almost all countries in world, regardless of size of their economy, hold significant forex reserves. </span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Components of India’s FOREX Reserves:</span></strong><span style="font-family:"Quicksand",serif"> Foreign currency assets (FCAs), Special Drawing Rights (SDRs), Gold Reserves and RBI’s Reserve position with International Monetary Fund (IMF). FCAs constitute largest component of India’s forex Reserves and is expressed in terms of US dollars.</span></span></span></p>
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'description' => '<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Reserve Bank of India (RBI) in its first bimonthly monetary policy review for financial year 2019-20 has cut the repo rate by 25 basis points(bps) or 0.25% to 6%. This decision was taken by RBI’s six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das in a 4-2 vote. It has maintained the policy stance at "neutral". It has lowered GDP growth forecast for current fiscal to 7.2</span>%<span style="font-family:"Quicksand",serif"> from the earlier estimate of 7.4%.</span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Policy Rates</span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Repo rate (repurchase rate):</span></strong><span style="font-family:"Quicksand",serif"> It was changed by 25 basis points to 6.0.</span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Reverse Repo Rate:</span></strong><span style="font-family:"Quicksand",serif"> It was changed by 25 basis points to 5.75%.</span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Marginal Standing Facility Rate:</span></strong><span style="font-family:"Quicksand",serif"> It was changed by 25 basis points to 6.25%.</span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Bank Rate:</span></strong><span style="font-family:"Quicksand",serif"> It was changed by 25 basis points to 6.25%.</span></span></span></li>
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<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Note:</span></strong><span style="font-family:"Quicksand",serif"> It was first back-to-back rate cut by the central bank since MPC was formed in late 2016. In its last policy meet (February 2019) and the first under Governor Shaktikanta Das, RBI had lowered repo rate by 25 basis points to 6.25% and changed policy stance to neutral from calibrated tightening, adopted in October 2018.</span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Key Terms</span></strong></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Repo rate (repurchase rate)</span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is rate at which RBI lends to banks for short periods against government securities. Its objective is to inject liquidity in the system. </span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Increase in repo rate squeezes liquidity out of system and increase interest rates, which will then reduce demand for funds and reduce inflation. </span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Similarly, when decreased, it injects liquidity in system making it cheaper for banks to borrow money. </span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">This is done by RBI by buying government securities/bonds from banks with agreement to sell them back at fixed rate.</span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Reverse repo</span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is rate at which banks lend funds to RBI or RBI borrows funds from other banks in short term. </span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">This is done by RBI selling government securities/ bonds to banks with commitment to buy them back at future date.</span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Marginal Standing Facility (MSF)</span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is rate at which scheduled banks can borrow funds overnight from RBI against government securities, if later doesn’t have the required eligible securities above SLR limit. It is very short term borrowing scheme for scheduled banks to meet.</span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Bank Rate</span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is rate charged by RBI for lending funds to commercial banks. It influences lending rates of commercial banks. Higher bank rate results in higher lending rates by banks. RBI can resort to raising the bank rate in order to curb liquidity and vice versa.</span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Cash Reserve Ratio (CRR)</span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It certain percentage of total deposits that commercial banks are required to maintain in form of cash reserve with central bank. RBI uses it to drain out excessive money from system. This money earns no interest.</span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Statutory Liquidity Ratio (SLR)</span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is portion of bank deposits that banks have to maintain or invest in government bonds in form of liquid assets like cash, gold and unencumbered securities, treasury bills, dated securities etc. It has to be maintained at close of business on every day. RBI does not pay any interest to banks for SLR.</span></span></span></li>
</ul>
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'title' => 'RBI first APAC central bank to begin interest rate easing cycle: Fitch',
'description' => '<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">According to Fitch Ratings Reserve Bank of India (RBI) is the first central bank in the Asia-Pacific (APAC) region to begin explicit interest rate easing cycle buoyed by benign food inflation and easier global financial condition.</span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">RBI Rate Cuts</span></strong></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Monetary Policy Committee (MPC), headed by RBI Govenor Shaktikanta Das had cut rates in February and April 2019, citing prospects of benign inflation. In the four months of 2019, RBI has cut policy interest rates twice by 0.25% each to one-year low of 6</span>%<span style="font-family:"Quicksand",serif">. This was first back-to-back rate cut since MPC was formed in late 2016. </span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Reasons for explicit easing cycle </span></strong></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Benign food inflation and easier global financial conditions following US Fed’s shift to a more dovish policy stance. Inflation at 2.9% has remained within RBI’s comfort zone of 4 per cent (+/- 2 per cent). </span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Fitch Projections</span></strong></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Fitch predicts that RBI may look for opportunities for further easing.<strong> </strong>But, modest fiscal slippage, relative to central government’s targets in recent years, has resulted in a stalling of fiscal consolidation. Election Campaign promises to support farmers’ incomes, including direct cash transfers after elections, will add to spending pressures in the current financial year.</span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Fitch has rated ‘BBB-’ on India, the lowest investment grade rating, with stable outlook. According to it, India’s ratings balance strong medium-term growth outlook and relative external resilience, with strong foreign reserve buffers, against high public debt, financial sector fragilities, and some lagging structural factors.</span></span></span></p>
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'title' => 'Monetary Policy: RBI cuts repo rate by 25 bps to 5.75%',
'description' => '<p style="margin-left:0in; margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Reserve Bank of India (RBI) in its second bimonthly monetary policy review for financial year 2019-20 has cut the repo rate by 25 basis points(bps) or 0.25% to 5.75%. This decision was unanimously taken by RBI’s six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das in 6-0 vote. It also changed its monetary policy stance to “accommodative” from “neutral” stating that “there is scope to accommodate growth concerns and reinvigorate private investment activity”. It was third such rate cut of 25 basis points in calendar year 2019. With this, RBI’s main policy rate now stands at level touched almost nine years ago in July 2010. It also lowered its growth forecast to 7</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">% f</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">or 2019-20 from the April view of 7.2</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Policy Rates</span></span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Repo rate (repurchase rate):</span></span></strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif""> It was changed by 25 basis points to 5.75</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Reverse Repo Rate:</span></span></strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif""> It was changed by 25 basis points to 5.50</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Marginal Standing Facility Rate:</span></span></strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif""> It was changed by 25 basis points to 6.0</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Bank Rate:</span></span></strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif""> It was changed by 25 basis points to 6.0</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Key Terms</span></span></strong></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Repo rate (repurchase rate)</span></span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is rate at which RBI lends to banks for short periods against government securities. Its objective is to inject liquidity in the system.</span></span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Increase in repo rate squeezes liquidity out of system and increase interest rates, which will then reduce demand for funds and reduce inflation.</span></span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Similarly, when decreased, it injects liquidity in system making it cheaper for banks to borrow money.</span></span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">This is done by RBI by buying government securities/bonds from banks with agreement to sell them back at fixed rate.</span></span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Reverse repo</span></span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is rate at which banks lend funds to RBI or RBI borrows funds from other banks in short term.</span></span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">This is done by RBI selling government securities/ bonds to banks with commitment to buy them back at future date.</span></span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Marginal Standing Facility (MSF)</span></span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is rate at which scheduled banks can borrow funds overnight from RBI against government securities, if later doesn’t have the required eligible securities above SLR limit. It is very short term borrowing scheme for scheduled banks to meet.</span></span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Bank Rate</span></span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is rate charged by RBI for lending funds to commercial banks. It influences lending rates of commercial banks. Higher bank rate results in higher lending rates by banks. RBI can resort to raising the bank rate in order to curb liquidity and vice versa.</span></span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Cash Reserve Ratio (CRR)</span></span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It certain percentage of total deposits that commercial banks are required to maintain in form of cash reserve with central bank. RBI uses it to drain out excessive money from system. This money earns no interest.</span></span></span></span></li>
</ul>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Statutory Liquidity Ratio (SLR)</span></span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is portion of bank deposits that banks have to maintain or invest in government bonds in form of liquid assets like cash, gold and unencumbered securities, treasury bills, dated securities etc. It has to be maintained at close of business on every day. RBI does not pay any interest to banks for SLR.</span></span></span></span></li>
</ul>
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'tag' => 'Monetary Policy & RBI',
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'title' => 'RBI scraps charges on NEFT and RTGS Transfers',
'description' => '<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Reserve Bank of India (RBI) has announced waiving off charges are applied on bank transfers carried out either by National Electronic Funds Transfer (NEFT) or Real Time Gross Settlement System (RTGS). This decision was taken to boost digital transactions and asked banks to pass on the benefits to customers.</span></span></span></span></p>
<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">NEFT and RTGS</span></span></strong></span></span></p>
<ul>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">RTGS and NEFT are bank transfer devices that allows individual to transfer funds electronically from one account to another. RTGS is meant for large-value instantaneous fund transfers while NEFT System is used for fund transfers up to Rs 2 lakh.</span></span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">RTGS transactions happen in real time, hence the beneficiary bank receives instruction to transfer funds immediately and transfer is instantaneous. Whereas, NEFT settlements happen in batches, as a result, there might be slight delay for actual transfer to take place from time the request for transfer. </span></span></span></span></li>
<li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">The minimum amount that can be remitted through RTGS is Rs 2 lakh, and there is no upper ceiling. In NEFT there is no minimum transfer limit, but there is Rs 10 lakh limit per transaction with no upper limit on the number of transactions.</span></span></span></span></li>
</ul>
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'title' => 'RBI announced 35 basis points (bps) cut in repo rate',
'description' => '<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Context:</strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">RBI has <strong>cut the repo rate by 35 basis points (bps), to 5.4%. </strong>This is <strong>fourth time in a row that </strong>the central bank has cut the key rate this calendar year, starting from February, 2019.</span></span></li>
</ul>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>What is repo rate?</strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">Repo and Reverse repo <strong>are short for repurchase agreements between the RBI and the commercial banks </strong>in the economy. In essence, <strong>the repo rate is the interest rate that the RBI charges a commercial bank when it borrows money from the RBI.</strong> </span></span></li>
</ul>
<p><strong><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">Implications of rate cut: </span></span></strong><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">It influences the interest rate in the economy. As such, <strong>if the repo falls, all interest rates in the economy should fall. </strong>And that is why common people should be interested in the RBI’s monetary policy.</span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>For borrowers:</strong> A <strong>reduction in lending rates in the economy will clearly benefit loan takers </strong>as borrowers' EMIs (equated monthly installments) are likely to go down assuming banks will pass on the benefit of the rate cut. </span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>For depositors: Deposits rates will also go down, thus it will hit the depositors.</strong></span></span></li>
</ul>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Does every cut in repo rate signify a reduction in interest rate?</strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>In the real world, the “transmission” of an interest rate cut (or increase) is not 100%. </strong>And that is why, <strong>even though when the RBI cut by 35 bps </strong>on Wednesday (7/08/2019), lay <strong>consumers may only receive a much lower reduction in the interest rate on their borrowings. </strong></span></span></li>
</ul>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Why rate cut by the RBI is not transmitted by the banks to their customers?</strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">This is <strong>due to a lot of factors </strong>— but <strong>primarily, it has to do with the health of the concerned commercial bank. </strong>Over the past few years, <strong>almost all banks</strong>, especially the ones in the public sector, <strong>have seen their profits plummet because many of their past loans have turned out to be non-performing assets.</strong></span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">To cover for these losses, <strong>the banks have to use their existing funds, </strong>which<strong> </strong>would have otherwise gone to common consumers for fresh loans.</span></span></li>
</ul>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Will the rate cut bring investments?</strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Investments</strong> <strong>depend essentially on the “real” interest rate. </strong>The real interest rate is the <strong>difference between the repo rate and retail inflation. </strong>As a variable, it <strong>allows an investor to compare the attractiveness of different economies</strong>. </span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Real interest rates in India have been rising,</strong> and that is <strong>one of the biggest reasons why investments are not happening. </strong> </span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The recent rate cut would <strong>reduce the real interest rate and hopefully attract more investment.</strong></span></span></li>
</ul>
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'title' => 'Banks’ exposure limits, lending norms eased for stressed NBFCs',
'description' => '<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Context: </strong>The RBI on 7/08/ 2019 <strong>unveiled more measures to enhance credit flow to the cash-starved Non- Banking Financial Companies (NBFCs) sector.</strong></span></span></p>
<p> </p>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Highlights:</strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The RBI has decided to <strong>raise banks’ exposure limit to a single NBFC to 20% of Tier-I capital of the bank</strong> as a step towards harmonization of the counter party exposure limit to single NBFC with that of the general limits.</span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>The limit was 15% earlier while other sector enjoyed the 20% limit.</strong></span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">RBI has also decided to <strong>allow bank lending to register NBFCs</strong> (other than micro - financing institutions) <strong>for on-lending to agriculture </strong>(investment credit) up to Rs. 10 lakh, micro and small enterprises up to Rs. 20 lakh and housing up to Rs. 20 lakh per borrower to be classified as <strong>Priority Sector Lending</strong> (PSL).</span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The <strong>RBI has also reduced risk weight for consumer credit</strong> (except credit card receivables), including personal loans, <strong>to 100% as against risk weight of 125% or higher, if warranted external rating of the counter party.</strong></span></span></li>
</ul>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Significance: </strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The <strong>measures are pertinent at a time when lending activity by many NBFCs have declined significantly</strong>, resulting in demand slowdown for a range of items including cars, tractors, white goods among others.</span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The hike will <strong>enable banks to increase the credit flow to big NBFCs.</strong></span></span></li>
</ul>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Other steps:</strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>24/7 NEFT transfer: </strong>The NEFT payment system that is available from 8 am to 7 pm on all working days of the week will be available on a 24/7 basis from Dec. 2019.</span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Bill payment system expanded: </strong>To leverage the advantages of Bharat Bill Payment System (BBPS), the RBI has decided to permit all categories of billers (except prepaid recharges) who <strong>provide for recurring bill payments,</strong> currently covering 5 segments- DTH, electricity, gas, telecom, and water bills.</span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>On tap bill payment: </strong>In order t<strong>o benefit from diversification of risk as also to encourage innovation and competition, </strong>the RBI has decided to offer ‘<strong>on tap’ authorization to entities </strong>desirous to function, operate or provide platforms for Bharat Bill Payment Operating Unit (BBPOU), Trade receivables Discounting System (TReDS) and White Label ATMs (WLAs).</span></span></li>
<li><strong><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">Digital Fraud Registry:</span></span></strong><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"> The RBI has proposed to facilitate the creation of a <strong>Central Payment Fraud Registry that will track digital transaction fraud.</strong></span></span></li>
</ul>
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'description' => '<p><strong><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">Context: </span></span></strong><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">The <strong>task force on offshore rupee markets</strong>, headed by <strong>former Dy. Governor Usha Thorat,</strong> has submitted its report to the RBI</span></span></p>
<p> </p>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Recommendations:</strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:black">It has suggested for <strong>extending trading hours</strong> to improve access of overseas users and <strong>allowing Indian banks to freely offer prices to global clients around the clock. </strong></span></span></span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">Allow users to <strong>undertake foreign exchange transactions up to $ 100 million in OTC currency derivative market without the need to establish underlying exposure.</strong></span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Enable rupee derivatives </strong>(settled in foreign currency) <strong>to be traded in the International Financial Services Centres </strong>(IFSC) <strong>in India.</strong></span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">To facilitate <strong>non-residents to hedge their foreign exchange exposure onshore, </strong>the task force recommended <strong>establishing a central clearing and settlement mechanism </strong>for non-resident transactions in the onshore market.</span></span></li>
<li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Align the tax treatment with global standard</strong></span></span></li>
</ul>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Significance of the off shore rupee market:</strong></span></span></p>
<ul>
<li><span style="font-size:11pt"><span style="background-color:white"><span style="font-family:"Calibri","sans-serif""><span style="color:black">The offshore rupee market has been <strong>making a larger impact on the local currency market</strong> helping with <strong>better price discovery and driving volatility,</strong> prompting RBI to look for ways to <strong>ensure greater stability for the rupee. </strong></span></span></span></span></li>
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'keyword' => 'monetary-policy-rbi',
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'title' => 'RBI to link loan EMI to external benchmarks',
'description' => '<p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Issue</strong></span></span></p>
<p style="margin-right:0in"> </p>
<p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Reserve Bank of India (RBI) on Wednesday made it mandatory for banks to link all their fresh retail loans to an external benchmark, effective October 1 , the central bank’s repo rate being one such benchmark.</span></span></p>
<p style="margin-right:0in"> </p>
<p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Background</strong></span></span></p>
<p style="margin-right:0in"> </p>
<p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">When the borrower stops paying interest or principal on a loan, the lender will lose money. Such a loan is known as Non-Performing Asset (NPA). Indian Banking industry is seriously affected by Non-Performing Assets<span style="background-color:white"><span style="color:#333333">. This move is expected to reduce credit risk effectively.</span></span></span></span></p>
<p style="margin-right:0in"> </p>
<p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:12.0pt">Details</span></strong></span></span></p>
<ul>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">The state-run banks have introduced repo-linked products for floating-rate home and auto loans, but the </span></span><a href="https://www.business-standard.com/topic/rbi" target="_blank"><span style="color:#333333">RBI </span></a><span style="background-color:white"><span style="color:#333333">said </span></span><a href="https://www.business-standard.com/topic/loans" target="_blank"><span style="color:#333333">loans </span></a><span style="background-color:white"><span style="color:#333333">to micro, small and medium enterprises (MSMEs) should also be linked to an external benchmark.</span></span></span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">The <strong>three external benchmarks</strong> the </span></span><a href="https://www.business-standard.com/topic/rbi" target="_blank"><span style="color:#333333">RBI </span></a><span style="background-color:white"><span style="color:#333333">proposed are <strong>policy repo rate</strong>, <strong>the Government of India’s three-month and six-month treasury bill yields published by Financial Benchmarks India Private (FBIL</strong>), or <strong>any other benchmark market interest rate published by FBIL.</strong></span></span></span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">The central bank amended its master directions on interest rate on advances too, reflecting the changes.Some banks do calculate their marginal cost of funds-based lending rate (MCLR) based on the three- and six-month treasury bills.</span></span></span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">The </span></span><a href="https://www.business-standard.com/topic/rbi" target="_blank"><span style="background-color:white"><span style="color:#333333">RBI </span></span></a><span style="background-color:white"><span style="color:#333333"> has been observing that due to various reasons, the transmission of policy rate changes to the lending rate of banks under the current MCLR framework has not been satisfactory.</span></span></span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">Banks are free to decide the spread over the external benchmark. However, </span></span><a href="https://www.business-standard.com/topic/credit-risk" target="_blank"><span style="background-color:white"><span style="color:#333333">credit risk </span></span></a><span style="background-color:white"><span style="color:#333333">premium may undergo change only when borrower’s credit assessment undergoes a substantial change, as agreed upon in the loan contract.</span></span></span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">Other components of spread, including operating cost, could be altered once in three years. The interest rate under external benchmark should be reset at least once in three months.</span></span></span></span></p>
</li>
</ul>
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'tag' => 'Monetary Policy & RBI',
'keyword' => 'monetary-policy-rbi',
'id' => (int) 2157,
'title' => 'RBI panel to assess adequacy of Forex reserves',
'description' => '<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Issue</strong></span></span></p>
<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Reserve Bank of India (RBI) is working on putting in place a formal mechanism to assess the adequacy of its foreign exchange, or forex, reserves. This is important as India’s external liabilities have been higher than its forex reserves in recent years.</span></span></p>
<p style="margin-right:0cm"> </p>
<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Background</strong></span></span></p>
<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Bimal Jalan Committee on Economic Capital Framework, had noted that the RBI’s forex reserves in 2008 were higher than country’s external debt, a position which has reversed in 2019.</span></span></p>
<p style="margin-right:0cm"> </p>
<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Details</strong></span></span></p>
<ul>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">At present, India’s foreign exchange reserves (more than $400 billion) are significantly lower than the country’s total external liabilities ($1 trillion) and even lower than total external debt ($500 billion).</span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">This position is opposite to that in 2008 when India’s foreign exchange reserves, at $310 billion, exceeded the then total external debt of about US$224 billion and provided a much larger coverage of total external liabilities that amounted to about $426 billion.</span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">RBI may be required to increase the size of its forex reserves with its concomitant implications for the balance sheet, risks and desired economic capital.</span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Centre is expected to raise around $10 billion from overseas markets through foreign currency bonds, on which it will have to bear currency risk. This also make up significant part of liability.</span></span></p>
</li>
</ul>
<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Forex Reserves</strong></span></span></p>
<ul>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">Foreign exchange reserves are cash and other reserve assets held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets.</span></span></p>
</li>
</ul>
<p><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">Foreign currency assets, gold, special drawing rights and reserve tranche position in the International Monetary Fund are the main components of India’s forex reserves.</span></span></p>
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'description' => '<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Issue</strong></span></span></p>
<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Reserve Bank of India (RBI) is working on putting in place a formal mechanism to assess the adequacy of its foreign exchange, or forex, reserves. This is important as India’s external liabilities have been higher than its forex reserves in recent years.</span></span></p>
<p style="margin-right:0cm"> </p>
<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Background</strong></span></span></p>
<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Bimal Jalan Committee on Economic Capital Framework, had noted that the RBI’s forex reserves in 2008 were higher than country’s external debt, a position which has reversed in 2019.</span></span></p>
<p style="margin-right:0cm"> </p>
<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Details</strong></span></span></p>
<ul>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">At present, India’s foreign exchange reserves (more than $400 billion) are significantly lower than the country’s total external liabilities ($1 trillion) and even lower than total external debt ($500 billion).</span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">This position is opposite to that in 2008 when India’s foreign exchange reserves, at $310 billion, exceeded the then total external debt of about US$224 billion and provided a much larger coverage of total external liabilities that amounted to about $426 billion.</span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">RBI may be required to increase the size of its forex reserves with its concomitant implications for the balance sheet, risks and desired economic capital.</span></span></p>
</li>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Centre is expected to raise around $10 billion from overseas markets through foreign currency bonds, on which it will have to bear currency risk. This also make up significant part of liability.</span></span></p>
</li>
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<p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Forex Reserves</strong></span></span></p>
<ul>
<li>
<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">Foreign exchange reserves are cash and other reserve assets held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets.</span></span></p>
</li>
</ul>
<p><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">Foreign currency assets, gold, special drawing rights and reserve tranche position in the International Monetary Fund are the main components of India’s forex reserves.</span></span></p>
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=> 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 531, 'title' => 'Forex reserves rises to $405.6 billion in March 2019', 'description' => '<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">According to the Reserve Bank of India (RBI), India's foreign exchange (forex) reserves surged by $3.602 billion to $405.638 billion in week to March 15, 2019. The surge was driven by rise in foreign currency assets, a major component of the overall reserves.</span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Reasons for increase</span></strong></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">The increase in forex reserves could partly be attributed to rising investments by foreign investors in Indian capital markets. The net foreign portfolio investment (FPI) in equity markets in till March 15, 2019 was $2.9 billion, highest since January 2018. Indian debt markets also have seen positive inflow of $1.2 billion till March 15, 2019.</span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Forex Reserves in March 2019</span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Foreign currency assets (FCA): </span></strong><span style="font-family:"Quicksand",serif">Increased by $3.546 billion to $377.773 billion.</span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Gold reserves: It rose by $38.9 million to $23.408 billion.</span></strong></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Special drawing rights (SDRs) with International Monetary Fund (IMF): </span></strong><span style="font-family:"Quicksand",serif">It rose by $5.9 million to $1.461 billion.</span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">RBI’s reserve position with IMF: </span></strong><span style="font-family:"Quicksand",serif">It increased by $12.1 million to $2.995 billion.</span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Forex Reserves </span></strong></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">They are reserve assets held by central bank of the country in foreign currencies. These reserve acts as buffer to be used in challenging times. They are also used as back liabilities and also to influence monetary policy. Almost all countries in world, regardless of size of their economy, hold significant forex reserves. </span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Components of India’s FOREX Reserves:</span></strong><span style="font-family:"Quicksand",serif"> Foreign currency assets (FCAs), Special Drawing Rights (SDRs), Gold Reserves and RBI’s Reserve position with International Monetary Fund (IMF). 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', 'author' => 'Nikhil Paigude', 'downlaodpdf' => 'https://www.mediafire.com/file/4zb51b2a3bkr598/Forex_reserves_rises.pdf/file', '[new]' => false, '[accessible]' => [ [maximum depth reached] ], '[dirty]' => [[maximum depth reached]], '[original]' => [[maximum depth reached]], '[virtual]' => [[maximum depth reached]], '[errors]' => [[maximum depth reached]], '[invalid]' => [[maximum depth reached]], '[repository]' => 'currentaffairs' }, (int) 1 => object(Cake\ORM\Entity) { 'tag' => 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 683, 'title' => 'Monetary Policy: RBI cuts repo rate by 25 bps to 6%', 'description' => '<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Reserve Bank of India (RBI) in its first bimonthly monetary policy review for financial year 2019-20 has cut the repo rate by 25 basis points(bps) or 0.25% to 6%. This decision was taken by RBI’s six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das in a 4-2 vote. It has maintained the policy stance at "neutral". It has lowered GDP growth forecast for current fiscal to 7.2</span>%<span style="font-family:"Quicksand",serif"> from the earlier estimate of 7.4%.</span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Policy Rates</span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Repo rate (repurchase rate):</span></strong><span style="font-family:"Quicksand",serif"> It was changed by 25 basis points to 6.0.</span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Reverse Repo Rate:</span></strong><span style="font-family:"Quicksand",serif"> It was changed by 25 basis points to 5.75%.</span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Marginal Standing Facility Rate:</span></strong><span style="font-family:"Quicksand",serif"> It was changed by 25 basis points to 6.25%.</span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Bank Rate:</span></strong><span style="font-family:"Quicksand",serif"> It was changed by 25 basis points to 6.25%.</span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Note:</span></strong><span style="font-family:"Quicksand",serif"> It was first back-to-back rate cut by the central bank since MPC was formed in late 2016. In its last policy meet (February 2019) and the first under Governor Shaktikanta Das, RBI had lowered repo rate by 25 basis points to 6.25% and changed policy stance to neutral from calibrated tightening, adopted in October 2018.</span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Key Terms</span></strong></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Repo rate (repurchase rate)</span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is rate at which RBI lends to banks for short periods against government securities. Its objective is to inject liquidity in the system. </span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Increase in repo rate squeezes liquidity out of system and increase interest rates, which will then reduce demand for funds and reduce inflation. </span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Similarly, when decreased, it injects liquidity in system making it cheaper for banks to borrow money. </span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">This is done by RBI by buying government securities/bonds from banks with agreement to sell them back at fixed rate.</span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Reverse repo</span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is rate at which banks lend funds to RBI or RBI borrows funds from other banks in short term. </span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">This is done by RBI selling government securities/ bonds to banks with commitment to buy them back at future date.</span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Marginal Standing Facility (MSF)</span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is rate at which scheduled banks can borrow funds overnight from RBI against government securities, if later doesn’t have the required eligible securities above SLR limit. It is very short term borrowing scheme for scheduled banks to meet.</span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Bank Rate</span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is rate charged by RBI for lending funds to commercial banks. It influences lending rates of commercial banks. Higher bank rate results in higher lending rates by banks. RBI can resort to raising the bank rate in order to curb liquidity and vice versa.</span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Cash Reserve Ratio (CRR)</span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It certain percentage of total deposits that commercial banks are required to maintain in form of cash reserve with central bank. RBI uses it to drain out excessive money from system. This money earns no interest.</span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Statutory Liquidity Ratio (SLR)</span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">It is portion of bank deposits that banks have to maintain or invest in government bonds in form of liquid assets like cash, gold and unencumbered securities, treasury bills, dated securities etc. It has to be maintained at close of business on every day. RBI does not pay any interest to banks for SLR.</span></span></span></li> </ul> ', 'created_date' => object(Cake\I18n\FrozenDate) {}, 'posturl' => 'monetary-policy-rbi-cuts-repo-rate-by-25-bps-to-6', 'image' => 'https://www.mediafire.com/convkey/f2f5/dc3zudjfhcgprf36g.jpg', 'fbimage' => 'https://www.mediafire.com/convkey/f2f5/dc3zudjfhcgprf36g.jpg', 'metatitle' => 'Monetary Policy: RBI cuts repo rate by 25 bps to 6%', 'metakeyword' => 'Reserve Bank of India, RBI Current Affairs, RBI Current Affair, Current Affairs of RBI', 'metadescription' => 'RBI in its first bimonthly monetary policy review for financial year 2019-20 has cut the repo rate by 25 basis points(bps) or 0.25% to 6%.', 'author' => 'Nikhil Paigude', 'downlaodpdf' => 'https://www.mediafire.com/file/qz74cm8gpc8cvdx/Monetary_Policy.pdf/file', '[new]' => false, '[accessible]' => [ [maximum depth reached] ], '[dirty]' => [[maximum depth reached]], '[original]' => [[maximum depth reached]], '[virtual]' => [[maximum depth reached]], '[errors]' => [[maximum depth reached]], '[invalid]' => [[maximum depth reached]], '[repository]' => 'currentaffairs' }, (int) 2 => object(Cake\ORM\Entity) { 'tag' => 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 851, 'title' => 'RBI first APAC central bank to begin interest rate easing cycle: Fitch', 'description' => '<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">According to Fitch Ratings Reserve Bank of India (RBI) is the first central bank in the Asia-Pacific (APAC) region to begin explicit interest rate easing cycle buoyed by benign food inflation and easier global financial condition.</span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">RBI Rate Cuts</span></strong></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Monetary Policy Committee (MPC), headed by RBI Govenor Shaktikanta Das had cut rates in February and April 2019, citing prospects of benign inflation. In the four months of 2019, RBI has cut policy interest rates twice by 0.25% each to one-year low of 6</span>%<span style="font-family:"Quicksand",serif">. This was first back-to-back rate cut since MPC was formed in late 2016. </span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Reasons for explicit easing cycle </span></strong></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Benign food inflation and easier global financial conditions following US Fed’s shift to a more dovish policy stance. Inflation at 2.9% has remained within RBI’s comfort zone of 4 per cent (+/- 2 per cent). </span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-family:"Quicksand",serif">Fitch Projections</span></strong></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Fitch predicts that RBI may look for opportunities for further easing.<strong> </strong>But, modest fiscal slippage, relative to central government’s targets in recent years, has resulted in a stalling of fiscal consolidation. Election Campaign promises to support farmers’ incomes, including direct cash transfers after elections, will add to spending pressures in the current financial year.</span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-family:"Quicksand",serif">Fitch has rated ‘BBB-’ on India, the lowest investment grade rating, with stable outlook. According to it, India’s ratings balance strong medium-term growth outlook and relative external resilience, with strong foreign reserve buffers, against high public debt, financial sector fragilities, and some lagging structural factors.</span></span></span></p> ', 'created_date' => object(Cake\I18n\FrozenDate) {}, 'posturl' => 'rbi-1st-apac-central-bank-interest-rate-easing-cycle', 'image' => 'https://www.mediafire.com/convkey/4874/s9wq4u4b56d449q6g.jpg', 'fbimage' => 'https://www.mediafire.com/convkey/4874/s9wq4u4b56d449q6g.jpg', 'metatitle' => 'RBI 1st APAC central bank to begin interest rate easing cycle', 'metakeyword' => 'In Banking Current Affairs, Fitch Ratings, Reserve Bank of India, first central bank, Asia-Pacific (APAC) region,interest rate easing cycle', 'metadescription' => ' Fitch Ratings Reserve Bank of India first central bank in the Asia-Pacific region to begin interest rate easing cycle ', 'author' => 'Nikhil Paigude', 'downlaodpdf' => 'https://www.mediafire.com/file/ga87z9b7rds8d6e/RBI_first_APAC.pdf/file', '[new]' => false, '[accessible]' => [ [maximum depth reached] ], '[dirty]' => [[maximum depth reached]], '[original]' => [[maximum depth reached]], '[virtual]' => [[maximum depth reached]], '[errors]' => [[maximum depth reached]], '[invalid]' => [[maximum depth reached]], '[repository]' => 'currentaffairs' }, (int) 3 => object(Cake\ORM\Entity) { 'tag' => 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 1381, 'title' => 'Monetary Policy: RBI cuts repo rate by 25 bps to 5.75%', 'description' => '<p style="margin-left:0in; margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Reserve Bank of India (RBI) in its second bimonthly monetary policy review for financial year 2019-20 has cut the repo rate by 25 basis points(bps) or 0.25% to 5.75%. This decision was unanimously taken by RBI’s six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das in 6-0 vote. It also changed its monetary policy stance to “accommodative” from “neutral” stating that “there is scope to accommodate growth concerns and reinvigorate private investment activity”. It was third such rate cut of 25 basis points in calendar year 2019. With this, RBI’s main policy rate now stands at level touched almost nine years ago in July 2010. It also lowered its growth forecast to 7</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">% f</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">or 2019-20 from the April view of 7.2</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Policy Rates</span></span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Repo rate (repurchase rate):</span></span></strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif""> It was changed by 25 basis points to 5.75</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Reverse Repo Rate:</span></span></strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif""> It was changed by 25 basis points to 5.50</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Marginal Standing Facility Rate:</span></span></strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif""> It was changed by 25 basis points to 6.0</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Bank Rate:</span></span></strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif""> It was changed by 25 basis points to 6.0</span></span><span style="font-size:9.0pt"><span style="font-family:"Times New Roman","serif"">%</span></span><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">.</span></span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Key Terms</span></span></strong></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Repo rate (repurchase rate)</span></span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is rate at which RBI lends to banks for short periods against government securities. Its objective is to inject liquidity in the system.</span></span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Increase in repo rate squeezes liquidity out of system and increase interest rates, which will then reduce demand for funds and reduce inflation.</span></span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Similarly, when decreased, it injects liquidity in system making it cheaper for banks to borrow money.</span></span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">This is done by RBI by buying government securities/bonds from banks with agreement to sell them back at fixed rate.</span></span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Reverse repo</span></span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is rate at which banks lend funds to RBI or RBI borrows funds from other banks in short term.</span></span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">This is done by RBI selling government securities/ bonds to banks with commitment to buy them back at future date.</span></span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Marginal Standing Facility (MSF)</span></span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is rate at which scheduled banks can borrow funds overnight from RBI against government securities, if later doesn’t have the required eligible securities above SLR limit. It is very short term borrowing scheme for scheduled banks to meet.</span></span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Bank Rate</span></span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is rate charged by RBI for lending funds to commercial banks. It influences lending rates of commercial banks. Higher bank rate results in higher lending rates by banks. RBI can resort to raising the bank rate in order to curb liquidity and vice versa.</span></span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Cash Reserve Ratio (CRR)</span></span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It certain percentage of total deposits that commercial banks are required to maintain in form of cash reserve with central bank. RBI uses it to drain out excessive money from system. This money earns no interest.</span></span></span></span></li> </ul> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Statutory Liquidity Ratio (SLR)</span></span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">It is portion of bank deposits that banks have to maintain or invest in government bonds in form of liquid assets like cash, gold and unencumbered securities, treasury bills, dated securities etc. It has to be maintained at close of business on every day. RBI does not pay any interest to banks for SLR.</span></span></span></span></li> </ul> ', 'created_date' => object(Cake\I18n\FrozenDate) {}, 'posturl' => 'monetary-policy-rbi-cuts-repo-rate-by-25-bps-to', 'image' => 'https://www.mediafire.com/convkey/9528/z96k5mi9i6cphv46g.jpg', 'fbimage' => 'https://www.mediafire.com/convkey/9528/z96k5mi9i6cphv46g.jpg', 'metatitle' => 'Monetary Policy: RBI cuts repo rate by 25 bps to 5.75%', 'metakeyword' => 'Reserve Bank of India, RBI Current Affairs, RBI Current Affair, Current Affairs of RBI', 'metadescription' => 'RBI in its first bimonthly monetary policy review for financial year 2019-20 has cut the repo rate by 25 basis points(bps) or 0.25% to 5.75%.', 'author' => 'Nikhil Paigude', 'downlaodpdf' => 'https://www.mediafire.com/file/nkifq4x5kaii7yq/Monetary_Policy.pdf/file', '[new]' => false, '[accessible]' => [ [maximum depth reached] ], '[dirty]' => [[maximum depth reached]], '[original]' => [[maximum depth reached]], '[virtual]' => [[maximum depth reached]], '[errors]' => [[maximum depth reached]], '[invalid]' => [[maximum depth reached]], '[repository]' => 'currentaffairs' }, (int) 4 => object(Cake\ORM\Entity) { 'tag' => 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 1384, 'title' => 'RBI scraps charges on NEFT and RTGS Transfers', 'description' => '<p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">Reserve Bank of India (RBI) has announced waiving off charges are applied on bank transfers carried out either by National Electronic Funds Transfer (NEFT) or Real Time Gross Settlement System (RTGS). This decision was taken to boost digital transactions and asked banks to pass on the benefits to customers.</span></span></span></span></p> <p style="margin-left:0in; margin-right:0in; text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">NEFT and RTGS</span></span></strong></span></span></p> <ul> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">RTGS and NEFT are bank transfer devices that allows individual to transfer funds electronically from one account to another. RTGS is meant for large-value instantaneous fund transfers while NEFT System is used for fund transfers up to Rs 2 lakh.</span></span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">RTGS transactions happen in real time, hence the beneficiary bank receives instruction to transfer funds immediately and transfer is instantaneous. Whereas, NEFT settlements happen in batches, as a result, there might be slight delay for actual transfer to take place from time the request for transfer. </span></span></span></span></li> <li style="text-align:justify"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="font-size:9.0pt"><span style="font-family:"Quicksand","serif"">The minimum amount that can be remitted through RTGS is Rs 2 lakh, and there is no upper ceiling. In NEFT there is no minimum transfer limit, but there is Rs 10 lakh limit per transaction with no upper limit on the number of transactions.</span></span></span></span></li> </ul> ', 'created_date' => object(Cake\I18n\FrozenDate) {}, 'posturl' => 'rbi-scraps-charges-neft-rtgs-tansfers', 'image' => 'https://www.mediafire.com/convkey/f041/mw5ejclm7m441tq6g.jpg', 'fbimage' => 'https://www.mediafire.com/convkey/f041/mw5ejclm7m441tq6g.jpg', 'metatitle' => 'RBI scrap charges on NEFT and RTGS Transfers', 'metakeyword' => 'Reserve Bank of India, waives off, charges om bank transfers,National Electronic Funds Transfer, NEFT, Real Time Gross Settlement System, RTGS ', 'metadescription' => 'Reserve Bank of India (RBI) has announced waiving off charges are applied on bank transfers carried out either by National Electronic Funds Transfer (NEFT) or Real Time Gross Settlement System (RTGS). ', 'author' => 'Nikhil Paigude', 'downlaodpdf' => 'https://www.mediafire.com/file/6d2yxuvbt8zyee5/RBI_scraps.pdf/file', '[new]' => false, '[accessible]' => [ [maximum depth reached] ], '[dirty]' => [[maximum depth reached]], '[original]' => [[maximum depth reached]], '[virtual]' => [[maximum depth reached]], '[errors]' => [[maximum depth reached]], '[invalid]' => [[maximum depth reached]], '[repository]' => 'currentaffairs' }, (int) 5 => object(Cake\ORM\Entity) { 'tag' => 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 1850, 'title' => 'RBI announced 35 basis points (bps) cut in repo rate', 'description' => '<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Context:</strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">RBI has <strong>cut the repo rate by 35 basis points (bps), to 5.4%. </strong>This is <strong>fourth time in a row that </strong>the central bank has cut the key rate this calendar year, starting from February, 2019.</span></span></li> </ul> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>What is repo rate?</strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">Repo and Reverse repo <strong>are short for repurchase agreements between the RBI and the commercial banks </strong>in the economy. In essence, <strong>the repo rate is the interest rate that the RBI charges a commercial bank when it borrows money from the RBI.</strong> </span></span></li> </ul> <p><strong><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">Implications of rate cut: </span></span></strong><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">It influences the interest rate in the economy. As such, <strong>if the repo falls, all interest rates in the economy should fall. </strong>And that is why common people should be interested in the RBI’s monetary policy.</span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>For borrowers:</strong> A <strong>reduction in lending rates in the economy will clearly benefit loan takers </strong>as borrowers' EMIs (equated monthly installments) are likely to go down assuming banks will pass on the benefit of the rate cut. </span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>For depositors: Deposits rates will also go down, thus it will hit the depositors.</strong></span></span></li> </ul> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Does every cut in repo rate signify a reduction in interest rate?</strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>In the real world, the “transmission” of an interest rate cut (or increase) is not 100%. </strong>And that is why, <strong>even though when the RBI cut by 35 bps </strong>on Wednesday (7/08/2019), lay <strong>consumers may only receive a much lower reduction in the interest rate on their borrowings. </strong></span></span></li> </ul> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Why rate cut by the RBI is not transmitted by the banks to their customers?</strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">This is <strong>due to a lot of factors </strong>— but <strong>primarily, it has to do with the health of the concerned commercial bank. </strong>Over the past few years, <strong>almost all banks</strong>, especially the ones in the public sector, <strong>have seen their profits plummet because many of their past loans have turned out to be non-performing assets.</strong></span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">To cover for these losses, <strong>the banks have to use their existing funds, </strong>which<strong> </strong>would have otherwise gone to common consumers for fresh loans.</span></span></li> </ul> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Will the rate cut bring investments?</strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Investments</strong> <strong>depend essentially on the “real” interest rate. </strong>The real interest rate is the <strong>difference between the repo rate and retail inflation. </strong>As a variable, it <strong>allows an investor to compare the attractiveness of different economies</strong>. </span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Real interest rates in India have been rising,</strong> and that is <strong>one of the biggest reasons why investments are not happening. </strong> </span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The recent rate cut would <strong>reduce the real interest rate and hopefully attract more investment.</strong></span></span></li> </ul> ', 'created_date' => object(Cake\I18n\FrozenDate) {}, 'posturl' => 'rbi-announced-35-basis-points', 'image' => 'https://www.mediafire.com/convkey/5e46/edya9k8m4k8b4jt6g.jpg', 'fbimage' => 'https://www.mediafire.com/convkey/5e46/edya9k8m4k8b4jt6g.jpg', 'metatitle' => 'RBI announced 35 basis points (bps)', 'metakeyword' => 'RBI announced 35 basis points, 35 basis points', 'metadescription' => 'RBI has cut the repo rate by 35 basis points (bps), to 5.4%. This is fourth time in a row that the central bank has cut the key rate this calendar year', 'author' => null, 'downlaodpdf' => 'https://www.mediafire.com/file/0aqrgkyyuueal8a/RBI_announced_35_basis.pdf/file', '[new]' => false, '[accessible]' => [ [maximum depth reached] ], '[dirty]' => [[maximum depth reached]], '[original]' => [[maximum depth reached]], '[virtual]' => [[maximum depth reached]], '[errors]' => [[maximum depth reached]], '[invalid]' => [[maximum depth reached]], '[repository]' => 'currentaffairs' }, (int) 6 => object(Cake\ORM\Entity) { 'tag' => 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 1852, 'title' => 'Banks’ exposure limits, lending norms eased for stressed NBFCs', 'description' => '<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Context: </strong>The RBI on 7/08/ 2019 <strong>unveiled more measures to enhance credit flow to the cash-starved Non- Banking Financial Companies (NBFCs) sector.</strong></span></span></p> <p> </p> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Highlights:</strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The RBI has decided to <strong>raise banks’ exposure limit to a single NBFC to 20% of Tier-I capital of the bank</strong> as a step towards harmonization of the counter party exposure limit to single NBFC with that of the general limits.</span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>The limit was 15% earlier while other sector enjoyed the 20% limit.</strong></span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">RBI has also decided to <strong>allow bank lending to register NBFCs</strong> (other than micro - financing institutions) <strong>for on-lending to agriculture </strong>(investment credit) up to Rs. 10 lakh, micro and small enterprises up to Rs. 20 lakh and housing up to Rs. 20 lakh per borrower to be classified as <strong>Priority Sector Lending</strong> (PSL).</span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The <strong>RBI has also reduced risk weight for consumer credit</strong> (except credit card receivables), including personal loans, <strong>to 100% as against risk weight of 125% or higher, if warranted external rating of the counter party.</strong></span></span></li> </ul> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Significance: </strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The <strong>measures are pertinent at a time when lending activity by many NBFCs have declined significantly</strong>, resulting in demand slowdown for a range of items including cars, tractors, white goods among others.</span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The hike will <strong>enable banks to increase the credit flow to big NBFCs.</strong></span></span></li> </ul> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Other steps:</strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>24/7 NEFT transfer: </strong>The NEFT payment system that is available from 8 am to 7 pm on all working days of the week will be available on a 24/7 basis from Dec. 2019.</span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Bill payment system expanded: </strong>To leverage the advantages of Bharat Bill Payment System (BBPS), the RBI has decided to permit all categories of billers (except prepaid recharges) who <strong>provide for recurring bill payments,</strong> currently covering 5 segments- DTH, electricity, gas, telecom, and water bills.</span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>On tap bill payment: </strong>In order t<strong>o benefit from diversification of risk as also to encourage innovation and competition, </strong>the RBI has decided to offer ‘<strong>on tap’ authorization to entities </strong>desirous to function, operate or provide platforms for Bharat Bill Payment Operating Unit (BBPOU), Trade receivables Discounting System (TReDS) and White Label ATMs (WLAs).</span></span></li> <li><strong><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">Digital Fraud Registry:</span></span></strong><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"> The RBI has proposed to facilitate the creation of a <strong>Central Payment Fraud Registry that will track digital transaction fraud.</strong></span></span></li> </ul> ', 'created_date' => object(Cake\I18n\FrozenDate) {}, 'posturl' => 'banks-exposure-limits-lending-norms-eased', 'image' => 'https://www.mediafire.com/convkey/e149/g2qvvnpnn785a3d6g.jpg', 'fbimage' => 'https://www.mediafire.com/convkey/e149/g2qvvnpnn785a3d6g.jpg', 'metatitle' => 'Banks’ exposure limits, lending norms eased', 'metakeyword' => 'Banks’ exposure limits, lending norms eased', 'metadescription' => 'The RBI on 7/08/ 2019 unveiled more measures to enhance credit flow to the cash-starved Non- Banking Financial Companies (NBFCs) sector', 'author' => null, 'downlaodpdf' => 'https://www.mediafire.com/file/d9vo4g4xgni605q/Banks%C6_exposure_limits%2C_lending.pdf/file', '[new]' => false, '[accessible]' => [ [maximum depth reached] ], '[dirty]' => [[maximum depth reached]], '[original]' => [[maximum depth reached]], '[virtual]' => [[maximum depth reached]], '[errors]' => [[maximum depth reached]], '[invalid]' => [[maximum depth reached]], '[repository]' => 'currentaffairs' }, (int) 7 => object(Cake\ORM\Entity) { 'tag' => 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 1858, 'title' => 'Usha Thorat panel suggests liberal currency market for offshore users', 'description' => '<p><strong><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">Context: </span></span></strong><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">The <strong>task force on offshore rupee markets</strong>, headed by <strong>former Dy. Governor Usha Thorat,</strong> has submitted its report to the RBI</span></span></p> <p> </p> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Recommendations:</strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:black">It has suggested for <strong>extending trading hours</strong> to improve access of overseas users and <strong>allowing Indian banks to freely offer prices to global clients around the clock. </strong></span></span></span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">Allow users to <strong>undertake foreign exchange transactions up to $ 100 million in OTC currency derivative market without the need to establish underlying exposure.</strong></span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Enable rupee derivatives </strong>(settled in foreign currency) <strong>to be traded in the International Financial Services Centres </strong>(IFSC) <strong>in India.</strong></span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">To facilitate <strong>non-residents to hedge their foreign exchange exposure onshore, </strong>the task force recommended <strong>establishing a central clearing and settlement mechanism </strong>for non-resident transactions in the onshore market.</span></span></li> <li><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Align the tax treatment with global standard</strong></span></span></li> </ul> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Significance of the off shore rupee market:</strong></span></span></p> <ul> <li><span style="font-size:11pt"><span style="background-color:white"><span style="font-family:"Calibri","sans-serif""><span style="color:black">The offshore rupee market has been <strong>making a larger impact on the local currency market</strong> helping with <strong>better price discovery and driving volatility,</strong> prompting RBI to look for ways to <strong>ensure greater stability for the rupee. </strong></span></span></span></span></li> </ul> ', 'created_date' => object(Cake\I18n\FrozenDate) {}, 'posturl' => 'usha-thorat-panel-suggests-liberal-currency-market', 'image' => 'https://www.mediafire.com/convkey/713a/ntw8rglj69jm90i6g.jpg', 'fbimage' => 'https://www.mediafire.com/convkey/713a/ntw8rglj69jm90i6g.jpg', 'metatitle' => 'Usha Thorat panel suggests liberal currency market', 'metakeyword' => 'Usha Thorat. RBI, liberal currency market, currency market', 'metadescription' => 'The task force on offshore rupee markets, headed by former Dy. Governor Usha Thorat, has submitted its report to the RBI', 'author' => null, 'downlaodpdf' => 'https://www.mediafire.com/file/vndyd6w7bwmplla/Usha_Thorat_panel_suggests.pdf/file', '[new]' => false, '[accessible]' => [ [maximum depth reached] ], '[dirty]' => [[maximum depth reached]], '[original]' => [[maximum depth reached]], '[virtual]' => [[maximum depth reached]], '[errors]' => [[maximum depth reached]], '[invalid]' => [[maximum depth reached]], '[repository]' => 'currentaffairs' }, (int) 8 => object(Cake\ORM\Entity) { 'tag' => 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 2121, 'title' => 'RBI to link loan EMI to external benchmarks', 'description' => '<p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Issue</strong></span></span></p> <p style="margin-right:0in"> </p> <p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Reserve Bank of India (RBI) on Wednesday made it mandatory for banks to link all their fresh retail loans to an external benchmark, effective October 1 , the central bank’s repo rate being one such benchmark.</span></span></p> <p style="margin-right:0in"> </p> <p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Background</strong></span></span></p> <p style="margin-right:0in"> </p> <p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">When the borrower stops paying interest or principal on a loan, the lender will lose money. Such a loan is known as Non-Performing Asset (NPA). Indian Banking industry is seriously affected by Non-Performing Assets<span style="background-color:white"><span style="color:#333333">. This move is expected to reduce credit risk effectively.</span></span></span></span></p> <p style="margin-right:0in"> </p> <p style="margin-right:0in"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong><span style="font-size:12.0pt">Details</span></strong></span></span></p> <ul> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">The state-run banks have introduced repo-linked products for floating-rate home and auto loans, but the </span></span><a href="https://www.business-standard.com/topic/rbi" target="_blank"><span style="color:#333333">RBI </span></a><span style="background-color:white"><span style="color:#333333">said </span></span><a href="https://www.business-standard.com/topic/loans" target="_blank"><span style="color:#333333">loans </span></a><span style="background-color:white"><span style="color:#333333">to micro, small and medium enterprises (MSMEs) should also be linked to an external benchmark.</span></span></span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">The <strong>three external benchmarks</strong> the </span></span><a href="https://www.business-standard.com/topic/rbi" target="_blank"><span style="color:#333333">RBI </span></a><span style="background-color:white"><span style="color:#333333">proposed are <strong>policy repo rate</strong>, <strong>the Government of India’s three-month and six-month treasury bill yields published by Financial Benchmarks India Private (FBIL</strong>), or <strong>any other benchmark market interest rate published by FBIL.</strong></span></span></span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">The central bank amended its master directions on interest rate on advances too, reflecting the changes.Some banks do calculate their marginal cost of funds-based lending rate (MCLR) based on the three- and six-month treasury bills.</span></span></span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">The </span></span><a href="https://www.business-standard.com/topic/rbi" target="_blank"><span style="background-color:white"><span style="color:#333333">RBI </span></span></a><span style="background-color:white"><span style="color:#333333"> has been observing that due to various reasons, the transmission of policy rate changes to the lending rate of banks under the current MCLR framework has not been satisfactory.</span></span></span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">Banks are free to decide the spread over the external benchmark. However, </span></span><a href="https://www.business-standard.com/topic/credit-risk" target="_blank"><span style="background-color:white"><span style="color:#333333">credit risk </span></span></a><span style="background-color:white"><span style="color:#333333">premium may undergo change only when borrower’s credit assessment undergoes a substantial change, as agreed upon in the loan contract.</span></span></span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><span style="background-color:white"><span style="color:#333333">Other components of spread, including operating cost, could be altered once in three years. The interest rate under external benchmark should be reset at least once in three months.</span></span></span></span></p> </li> </ul> ', 'created_date' => object(Cake\I18n\FrozenDate) {}, 'posturl' => 'rbi-to-link-loan-emi-to-external', 'image' => 'https://www.mediafire.com/convkey/19e7/dfwq6nmgqygjpx36g.jpg', 'fbimage' => 'https://www.mediafire.com/convkey/19e7/dfwq6nmgqygjpx36g.jpg', 'metatitle' => 'RBI to link loan EMI to external benchmarks', 'metakeyword' => 'RBI to link loan EMI to external benchmarks', 'metadescription' => 'The Reserve Bank of India (RBI) on Wednesday made it mandatory for banks to link all their fresh retail loans to an external benchmark, effective October', 'author' => null, 'downlaodpdf' => 'https://www.mediafire.com/file/3r88e4bxkx94w9v/RBI_to_link_loan_EMI.pdf/file', '[new]' => false, '[accessible]' => [ [maximum depth reached] ], '[dirty]' => [[maximum depth reached]], '[original]' => [[maximum depth reached]], '[virtual]' => [[maximum depth reached]], '[errors]' => [[maximum depth reached]], '[invalid]' => [[maximum depth reached]], '[repository]' => 'currentaffairs' }, (int) 9 => object(Cake\ORM\Entity) { 'tag' => 'Monetary Policy & RBI', 'keyword' => 'monetary-policy-rbi', 'id' => (int) 2157, 'title' => 'RBI panel to assess adequacy of Forex reserves', 'description' => '<p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Issue</strong></span></span></p> <p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Reserve Bank of India (RBI) is working on putting in place a formal mechanism to assess the adequacy of its foreign exchange, or forex, reserves. This is important as India’s external liabilities have been higher than its forex reserves in recent years.</span></span></p> <p style="margin-right:0cm"> </p> <p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Background</strong></span></span></p> <p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Bimal Jalan Committee on Economic Capital Framework, had noted that the RBI’s forex reserves in 2008 were higher than country’s external debt, a position which has reversed in 2019.</span></span></p> <p style="margin-right:0cm"> </p> <p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Details</strong></span></span></p> <ul> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">At present, India’s foreign exchange reserves (more than $400 billion) are significantly lower than the country’s total external liabilities ($1 trillion) and even lower than total external debt ($500 billion).</span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">This position is opposite to that in 2008 when India’s foreign exchange reserves, at $310 billion, exceeded the then total external debt of about US$224 billion and provided a much larger coverage of total external liabilities that amounted to about $426 billion.</span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">RBI may be required to increase the size of its forex reserves with its concomitant implications for the balance sheet, risks and desired economic capital.</span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Centre is expected to raise around $10 billion from overseas markets through foreign currency bonds, on which it will have to bear currency risk. This also make up significant part of liability.</span></span></p> </li> </ul> <p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Forex Reserves</strong></span></span></p> <ul> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">Foreign exchange reserves are cash and other reserve assets held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets.</span></span></p> </li> </ul> <p><span style="font-size:11.0pt"><span style="font-family:"Calibri","sans-serif"">Foreign currency assets, gold, special drawing rights and reserve tranche position in the International Monetary Fund are the main components of India’s forex reserves.</span></span></p> ', 'created_date' => object(Cake\I18n\FrozenDate) {}, 'posturl' => 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style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Reserve Bank of India (RBI) is working on putting in place a formal mechanism to assess the adequacy of its foreign exchange, or forex, reserves. This is important as India’s external liabilities have been higher than its forex reserves in recent years.</span></span></p> <p style="margin-right:0cm"> </p> <p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Background</strong></span></span></p> <p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Bimal Jalan Committee on Economic Capital Framework, had noted that the RBI’s forex reserves in 2008 were higher than country’s external debt, a position which has reversed in 2019.</span></span></p> <p style="margin-right:0cm"> </p> <p style="margin-right:0cm"><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif"><strong>Details</strong></span></span></p> <ul> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">At present, India’s foreign exchange reserves (more than $400 billion) are significantly lower than the country’s total external liabilities ($1 trillion) and even lower than total external debt ($500 billion).</span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">This position is opposite to that in 2008 when India’s foreign exchange reserves, at $310 billion, exceeded the then total external debt of about US$224 billion and provided a much larger coverage of total external liabilities that amounted to about $426 billion.</span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">RBI may be required to increase the size of its forex reserves with its concomitant implications for the balance sheet, risks and desired economic capital.</span></span></p> </li> <li> <p><span style="font-size:11pt"><span style="font-family:Calibri,sans-serif">The Centre is expected to raise around $10 billion from overseas markets through foreign currency bonds, on which it will have to bear currency risk. 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