The Indian rupee gained on Thursday after the US Federal Reserve (US Fed) kept its policy rates unchanged while tightening the pace of normalisation. Bond yields also remained steady as the US Fed policy fuelled risk appetite in the emerging market’s (EM’s) assets. For details please click on the following link: Rupee gains, bond yields stable after US Fed keeps policy rates…
Significant easing of liquidity is critical for better transmission
Significant easing of liquidity is critical for better transmission. When banks face a liquidity crunch, they are unable to toe the RBI’s line and lower deposit rates in a hurry. With no relief on the cost front, their ability to lower lending rates without hurting margins is difficult.
SBI will link interest rate on large savings account deposits to RBI’s repo rate from May 1.Repo-link effect: SBI savings a/c holders with balance above ₹1 lakh to get lower interest. Interest rate on SBI’s short-term loans like cash credit and overdraft facilities will also be linked to the repo rate.
Even as the RBI has held its repo rate, banks are likely to take cues from the bond markets, where yields are likely to inch up
RBI vide its notification dated 7th June 2018 inform all the Scheduled Commercial Banks (including RRBs), Local Area Banks (LABs), Urban Co-operative Banks / State Co-operative Banks /District Central Co-operative Banks and Small Finance Banks/Payment Banks that wef 1st July 2018 the rate of interest has since been reviewed and it was decided that the rate of interest payable…
Although the introduction of MCLR has resulted in better transparency on fixing of lending rates, banks have frequently adjusted the spreads, thereby impeding transmission to the actual lending rates: RBI
While PSU banks have cut MCLR the most since April 2016, when the new benchmark rate was first introduced, surprisingly foreign banks sport the lowest MCLR amongst all banks.
RBI’s MONETARY POLICY COMMITTEE : GOVERNOR’S ROLE REDUCED. 1. The Government has notified the formation of ” Monetary Policy Committee” (MPC) under the RBI. This committee will take decision on interest rate or Repo rate in a transparent manner in future. 2. MPC will bring significant changes in the power of the RBI Governor. 3.…