logo
  Join        Login             Stock Quote

RBI Dont Play T20.....

 January 24, 2012 01:04 PM


WHAT IS THE REAL MEANING?
Today RBI went for a CRR cut which was expected but went expecting suddenly for the market. Well Currently RBI has reduced the CRR from 6% to 5.5% which will lead to inflow of Rs.32000cr in to the banks pockets. Now market speculators will turn out the meaning that RBI has injected money for lending into the system. But I am sorry to make an analysis that RBI has injected the money in order to make Banks adjust their Balance sheet against rising NPA. Further this will help them to manage the tier I capital norms of the banks after the implementation of Basel III.
WILL IT BE INFLATION SUPPORT?
In my research find RBI steps of actions towards monetary balance is very much in line with India's economic growth. I don't find any reason why RBI should reduce the repo rates and the reverse repo rates. It is very much premature to roll back the repo rates as inflation is still way above the danger zone. Even I find that this CRR might go for spooking up the inflation devil acting as a steroid. Since the thumb rule` of CRR is that when inflation rises CRR is the common weapon used to control inflation. Reduction of CRR will give Rs 32000 cr to banks to lend but they will not lend and further even if it's being given for lending Indian corporate still finds its high cost of loans. RBI has made one thing very clear that its policies will depend and will be designed depending upon the policy actions required for the Governments.
The present scenario of the economy does not support for repo rate cuts. Since NPA are increasing and that is backed by lack of policy actions from the governments .Government has borrowed too much and this has spooked the system with funds and resulting increase in inflation. Currently the Government of India will borrow Rs 400 billion more than its revised borrowing target of Rs 4.7 trillion in the bond market by March for the current financial year 2011-12.Hence RBI actions regarding repo rates are next to negligible. India needs policies to draw investments and then only repo rates real action can be found. If currently RBI goes for an repo rate reduction then the liquidity will find ways into the existing business environment and not into new projects. Further RBI has reduced the outlook for india's GDP growth from 7.6% to 7% which eliminates the scope of repo rate cuts in the near future.
POLICY WHAT WE NEED?
If today the government of India comes up with New land Acquisition Bill, DTC, GST, New Companies bill 2011 then repo rates reduction will not be required to find India's economic growth. Moreover all these new bills will open up investment opportunities, consumption and savings of the economy resulting a boost to RBI policy actions.

Next Page >>12
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageChart Says This Retailer's Comeback Isn't Finished

One of the surprises, at least on the surface, of the market's recent swoon was the outperformance of read on...

article imageETF Performance Review: Major Asset Classes | 19 Dec 2014

It’s all about real estate investment trusts (REITs) these days when it comes to bullish performance among read on...

article imageOil and Global Stock Markets Rebounding Sharply

So far so good on our expectation of a 4 to 5% pullback and then a resumption of the bull read on...

article imageGrading the FOMC

Love its members or loathe them, you have to admire the gradual impact the policy-making committee has had read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

Oil and Global Stock Markets Rebounding Sharply
More Articles on: Finance



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.