Expert views on RBI's CRR cut
MUMBAI (Reuters) - The Reserve Bank of India on Friday cut the cash reserve ratio for banks by 75 basis points in order to ease tight liquidity in the banking system.
The RBI cut the cash reserve ratio, the share of deposits banks must hold with the central bank, to 4.75 percent, effective Saturday, less than a week ahead of its mid-quarter policy review on March 15.
ANINDYA DASGUPTA, TREASURER, BARCLAYS CAPITAL, MUMBAI
"I attribute a low probability to a rate cut in March and with the CRR cut, now further OMOs (open market operation) are also unlikely and combining these two factors, I don't expect the 10-year bond yield to fall much.
"But the biggest beneficiary of the CRR cut will be CDs (certificates of deposit) and there should be some steepening of the swap curve as well."
A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI
"This is surprising. After this cut, no change is expected in the RBI's policy review on Thursday. The cut should by and large take care of the liquidity deficit, and I don't expect the overnight cash rates to get into double digits after the tax outflows happen.
"I expect the 10-year yield to recover some lost ground, and come back to 8.25 percent on Monday. I expect another cut in the CRR in April, by another 25 basis points."
SAUGATA BHATTACHARYA, ECONOMIST, AXIS BANK, MUMBAI
"My sense is that the RBI will not probably do anything more on the 15th. This is much higher than what the markets were expecting. This move will certainly ease the crunch created by the advance tax outflows."
DEVEN CHOKSEY, CEO, K R CHOKSEY SHARES AND SECURITIES, MUMBAI
"This is a very positive move. The RBI was expected to cut the CRR rate in the policy announcement on March 15. By doing it a little earlier, they (the RBI) have brought liquidity in the system to cover what could have put a large strain on the banks."
GAJENDRA NAGPAL, CEO, UNICON FINANCIAL, NEW DELHI
"This is a surprising move but it's definitely a step in the right direction. This will ensure that liquidity situation improves in the market and smooth credit flows to priority sectors. The move brings us closer to a cut in the interest rates."
N.S. VENKATESH, HEAD OF TREASURY, IDBI BANK, MUMBAI
"By doing this, RBI injects liquidity into the system so it will take care of productive credit requirements without putting much pressure on liquidity. It will add to the bottom lines of banks.
"Considering the fact that the GDP numbers indicated that growth is slowing down and also inflation numbers have tapered down, I think, RBI will be able to look at cutting rates in the April policy but they will definitely look at the budget numbers to look whether fiscal consolidation is happening."
ANUBHUTI SAHAY, ECONOMIST, STANDARD CHARTERED BANK, MUMBAI
"The press release does not indicate a change in stance as far as repo rate is concerned. We don't expect a repo rate cut on March 15. This move was needed because of the tight liquidity situation in the system."
ASHISH VAIDYA, EXECUTIVE DIRECTOR AND HEAD OF INTEREST RATES, UBS
"I think this move was done to settle any fears about liquidity after the advance tax payments on March 15. The initial reaction in bonds will be a fall of about 2-3 basis points. We should see the one-year swaps fall to 8.05.
"This CRR cut should settle the dust."
M. NARENDRA, CHAIRMAN AND MANAGING DIRECTOR, INDIAN OVERSEAS BANK
"Short-term rates were going very high and unnecessarily bulk deposit rates were also going up. I expect these bulk deposit rates to ease now after the cut. In order to ensure all productive sectors get credit deployment, RBI has taken the right step without waiting for the March 15 review.
"I expect profitability for banks to improve reasonably although it is too early to gauge the impact now. I don't expect any change in fixed deposit rates. They will move with lending rates."
SRIVIDYA RAJESH, FUND MANAGER, SUNDARAM BNP PARIBAS ASSET MANAGEMENT, CHENNAI
"The market was expecting a CRR cut but the quantum
of the cut has definitely come as a surprise. So, to that extent the move will impact the markets positively, especially banks.
"But we are still some time away from the interest rate cut because the crude price is high and the rupee has again depreciated a bit."
M.D. MALLYA, CHAIRMAN AND MANAGING DIRECTOR, BANK OF BARODA
"We expected a CRR cut in the background of tight liquidity to the extent of 50 basis points. So 75 basis points is a pleasant surprise.
"It should meet a large portion of the present liquidity gap in the system. It is very clear that there is a sentiment towards moderation of interest rates -- both lending and deposits -- but we will wait for the RBI to come out with their policy."
(Reporting by Neha Arora, Henry Foy, Shamik Paul, Sumeet Chatterjee, Swati Pandey and Suvashree Dey Choudhury; Editing by Aradhana Aravindan)
- Tweet this
- Share this
- Digg this
- India to allow Nokia to transfer Chennai factory to Microsoft
- SPECIAL REPORT - In the land of the holy cow, fury over beef exports
- IIP slumps 1.8 pct, shrinks for first time in four months
- High-end global restaurants sprout to feed India's rich
- GMR picks Citi, three others for $300-$350 million airport IPO - sources
Relief for Nokia
A court on Thursday accepted an appeal by Nokia to release its local factory after it was seized by authorities in a tax dispute, removing a hurdle to the sale of the company's mobile phone business to Microsoft . Full Article
Amount of dirty money leaving developing world jumped 14 pct in 2011 - report. Full Article