Wait...

Online Export Import Data Search

Complete Training Video : Click Here

Rupee's surge may push RBI to use rare cash tool.


Date: 20-03-2017
Subject: Rupee's surge may push RBI to use rare cash tool
The rupee's surge and a banking system awash with funds will shift focus to a little-used tool in the Indian central bank's arsenal before next month's policy review. 

The Reserve Bank of India may consider raising the cash reserve ratio for the first time since 2010 if deposits accumulated due to November's cash ban don't flee over the coming months, economists say. Banks are holding a near-record 5 trillion rupees ($76 billion) of surplus cash, according to the Bloomberg Intelligence India Banking Liquidity Index, limiting the RBI's ability to buy dollars and curb rupee gains to avoid further increasing liquidity. 

This complicates matters for Governor Urjit Patel, who shifted the monetary stance to neutral last month from accommodative as inflation accelerates. A stronger rupee would help rein in price pressures but runaway gains could slow a recent export recovery by making shipments less competitive. 

"If the surplus liquidity that we are seeing becomes more of a permanent nature, we can see the RBI resort to a cash reserve ratio hike," said Indranil Pan, chief economist at IDFC Bank Ltd. in Mumbai. He, however, does not expect such an increase at the RBI's April 6 review. 

The CRR is the amount of deposits banks need to maintain as reserves. It was last raised in 2010 when India saw record foreign inflows into its stock market. 

This time the influx is homegrown: bank deposits have surged since November after Prime Minister Narendra Modi's clampdown on cash. Some of the money could be converted back into cash since the RBI removed withdrawal restrictions last week, but the country's largest bank estimates that as much as half of it could stay back. 

While the RBI has been using a slew of instruments including reverse repo operations and cash management bills to sterilize the inflows, these come at a cost. Citigroup Inc. estimates the government will spend 60 billion rupees in the year through March to pay interest and any more steps by the RBI to absorb the cash risk lowering its dividend to the government. 

The CRR, on the other hand, is interest-free. 

"A hike in the cash reserve ratio could once again become an option if the surplus liquidity conditions persist," Samiran Chakraborty, chief economist for India at Citi, wrote in a March 7 report. 

RBI's Challenge

The rupee has gained about 2 percent to a 16-month high in March after Modi's landslide state election win, outperforming its Asian peers and all but five of the world's emerging-market currencies. Patel had said last month that the currency is broadly where it should be and that the RBI intervenes only to curb volatility. 

India will attract $55 billion in capital flows in the year through March 2018, part of which the RBI will mop up to boost foreign-exchange reserves by $20 billion, according to Deutsche Bank AG. The intervention will weaken the rupee to 67.5 per dollar by the end of December from about 65.5 per dollar on Friday, the bank predicts, though this is much stronger than its previous estimate of 70 per dollar. 

"We expect the RBI to continue managing volatility," Kaushik Das, India economist at Deutsche Bank, wrote in the report. 

Source: economictimes.indiatimes.com

Get Sample Now

Which service(s) are you interested in?
 Export Data
 Import Data
 Both
 Buyers
 Suppliers
 Both
OR
 Exim Help
+


What is New?

Date: 13-06-2018
Notification No. 27/2018-Central Tax
Seeks to specify goods which may be disposed off by the proper officer after its seizure.

Date: 12-06-2018
DGFT Notification No.11/2015-2020
Amendment in impot policy conditions of Natural Rubber under Exim Code 4001 10 of Chapter 40 of ITC(HS), 2017 - Schedule - 1 (Import Policy).

Date: 12-06-2018
Public Notice No. 13/2015-2020
Eligibility of Indian Mackerel under Table 2 of Appendix 3B of Foreign Trade Policy, 2015-20.

Date: 08-06-2018
Notification No.51/2018 - Customs (N.T.)
Notification under Section 7 notifying Surat airport as Customs airport.

Date: 08-06-2018
Notification No.50/2018 - Customs (N.T.)
Powers of adjudication of the officers of Customs.

Date: 08-06-2018
Circular No.16/2018-Customs
Powers of adjudication of the officers of Customs- reg.

Date: 08-06-2018
Circular No.16/2018-Customs
Powers of adjudication of the officers of Customs- reg.

Date: 07-06-2018
Notification No.49/2018-Customs (N.T.)
Exchange rates notification No.49/2018 dated 07.06.2018

Date: 07-06-2018
DGFT Notification No.10/2015-2020
Amendments in para 6.08 (b) of Foreign Trade Policy 2015-20.

Date: 07-06-2018
A.P. (DIR Series) Circular No. 30
Foreign Investment in India -Reporting in Single Master Form



Exim Guru Copyright © 1999-2018 Exim Guru. All Rights Reserved.
The information presented on the site is believed to be accurate. However, InfodriveIndia takes no legal responsibilities for the validity of the information.
Please read our Terms of Use and Privacy Policy before you use this Export Import Data Directory.

EximGuru.com

C/o Infodrive India
E-2, 3rd Floor, Kalkaji Main Road
New Delhi - 110019, India
Phone : 011 - 40703001