RBI keeps repo and reverse repo rates unchanged
Mumbai, Dec 5: The Reserve Bank of India (RBI) Wednesday expectedly kept interest rates unchanged but held out a promise to cut them if the upside risks to the inflation do not materialise.
It also coaxed banks to lend more in order to support the slowing economy.
With all the six member of the monetary policy committee (MPC) voting for a hold on rates, the RBI kept benchmark repurchase (repo) rate at 6.5 per cent.
Having raised rates twice this year, the central bank retained its 'calibrated tightening' policy stance.
"Even as inflation projections have been revised downwards significantly and some of the risks pointed out in the last resolution have been mitigated, especially of crude oil prices, several uncertainties still cloud the inflation outlook," it said in a statement.
While the statement was silent on future outlook on interest rates, RBI Governor Urjit Patel at the customary post MPC meeting press conference held out hope of a reduction if upside risks to inflation did not materialise.
"If the upside risks we have flagged do not materialise or are muted in their impact as reflected in incoming data, there is a possibility of space opening up for commensurate policy actions by the MPC," Patel said.
He said the MPC retained its stance at calibrated tightening "so as to buy time to pause, reflect and undertake future policy action with more robust inflation signals".
The RBI lowered inflation forecast for the second half of the fiscal year that ends in March 2019 to 2.7-3.2 per cent from a range of 3.9-4.5 per cent. The projection is below the medium-term target of 4 per cent.
Inflation in October eased to a 13-month low of 3.31 per cent.
It retained GDP growth forecast for the current fiscal year at 7.4 per cent.
In a bid to boost lending by banks by freeing up resources, the RBI lowered the reserves lenders are compulsorily required to hold in the form of government securities.
Starting first quarter of 2019 calendar year, it would begin to lower banks' mandatory bond holding ratios by 25 basis points each quarter until it reaches 18 per cent of deposits.
The statutory liquidity ratio (SLR) currently stands at 19.50 per cent and the move to lower the ratio is expected to prod banks to lend more rather than park their cash in safe-haven government securities.
"It is proposed to reduce the SLR by 25 basis points every calendar quarter until the SLR reaches 18 per cent of NDTL. The first reduction of 25 basis points will take effect in the quarter commencing January 2019," the RBI said in a separate statement.
The current SLR is 19.5 per cent of Net Demand and Time Liabilities (NDTL).
The RBI had raised repo rate to 6.25 per cent in June and followed it up by another hike to 6.5 per cent in August. It kept the rates unchanged in October and shifted stance to 'calibrated tightening' from neutral.
While the decision on keeping the policy rate unchanged was unanimous, Ravindra H Dholakia, one of the six members in the MPC voted to change the stance to neutral.
The MPC noted that the benign outlook for headline inflation is driven mainly by the unexpected softening of food inflation and collapse in oil prices in a relatively short period of time.
Excluding food items, inflation has remained sticky and elevated, and the output gap remains virtually closed.
"The MPC also noted that even as escalating trade tensions, tightening of global financial conditions and slowing down of global demand pose some downside risks to the domestic economy, the decline in oil prices in recent weeks, if sustained, will provide tailwinds," the statement said.
It further said the acceleration in investment activity also bodes well for the medium-term growth potential of the economy.
"The time is apposite to further strengthen domestic macroeconomic fundamentals. In this context, fiscal discipline is critical to create space for and crowd in private investment activity," the MPC said.
International crude oil prices have declined sharply since the last policy in October. The price of Indian crude basket collapsed to below USD 60 a barrel by end-November after touching USD 85 a barrel in early October.
In a separate statement, the RBI said the lending rate for retail and MSE borrowers would be benchmarked to external rates with effect from April 1. These could be repo rate or treasury bill yield or any other external benchmark market interest rate.
The proposal is aimed at ensuring greater transparency in lending rates by banks, the RBI said, adding final guidelines would be issued in this regard later this month.
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Cong says LoPs not invited to Putin banquet, takes swipe at Tharoor for accepting invite
New Delhi (PTI): The Congress on Friday said Leaders of Opposition Mallikarjun Kharge and Rahul Gandhi have not been invited to the banquet for Russian President Vladimir Putin, and took a swipe at its own MP Shashi Tharoor for accepting the invite.
Congress general secretary in-charge communications Jairam Ramesh said, "There has been speculation whether the Leader of the Opposition in the Lok Sabha and the Leader of the Opposition in the Rajya Sabha have been invited for tonight's official dinner in honour of President Putin. The two LoPs have not been invited."
Congress' media and publicity department head Pawan Khera accused the government of breaking protocols daily and not believing in democratic principles.
"There is no invite to both the LoPs, Mr (Mallikarjun) Kharge and Mr (Rahul) Gandhi. This comes as a surprise but I don't think we should be surprised. This government is known to be breaching all protocols. What else to say, ask the government," he told PTI Videos on the sidelines of an event.
Asked about party MP Tharoor getting invited to the banquet and accepting the invitation, Khera said, "Ask Mr. Tharoor. All of us who are in the party, if our leaders don't get invited and we get invited, we need to question our own conscience and listen to our conscience. Politics has been played in inviting or not inviting people, which in itself is questionable and those who accept such an invite is also questionable," Khera said.
"We would have listened to our voice of conscience," he added.
Earlier, Tharoor said there was a time when the chairman of the external affairs committee was routinely invited but that practice seems to have stopped from some years.
"It has been resumed ...I have been invited, yes. I will definitely go," the chairman of the Parliamentary Standing Committee on External Affairs said.
On the LoPs reportedly not getting an invite, Tharoor said, "I don't know on what basis invitations were sent. I think the custom that usually used to be followed was for a wide representation. Certainly, I remember in the olden days, they used to invite not only the LoPs, (but) various other cross section of representatives of different parties. It conveys a good impression."
"I dont know the basis (of invitation), this is all done by the government, by the protocol by the Rashtrapati Bhawan, what do I know. All I can say I have honoured to have been invited. Of course I will go," Tharoor told reporters in the Parliament House complex.
Gandhi on Thursday had alleged that the government tells visiting foreign dignitaries not to meet the Leader of the Opposition due to its "insecurity".
His remarks had come hours ahead of Putin's two-day visit to India.
Gandhi had said it is a tradition that visiting foreign dignitaries meet the LoP but Prime Minister Narendra Modi and the Ministry of External Affairs were not following this norm.
"Normally the tradition is that those who come from abroad have a meeting with the LoP. This used to happen during (Atal Bihari) Vajpayee ji's time, Manmohan Singh ji's time, it has been a tradition but what happens these days is that when foreign dignitaries come and when I go abroad, the government suggests to them to not meet the LoP," Gandhi had told reporters in Parliament House complex.
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