Almost 12 lakh crore old notes deposited so far: RBI

The repo rate is the interest at which RBI lends money to other banks. We expect RBI to soften its lending rate by 25 basis points, anything above than expected could give boost to the market.

Policymakers said the decision was consistent with the goals of achieving consumer price index inflation at 5% for the fourth quarter, but reduced their economic growth forecast to 7.1% from 7.6%.

We think RBI has taken a very pragmatic stance based on the wider market conditions; Global factors: it is widely perceived based on the US Federal Reserve’s own commentary and employment data that it may hike its benchmark rates in next week’s Fed Committee meeting. Core inflation assumes critical importance in framing the policy.

” RBI keeps policy rate unchanged at 6.25%”.

Meanwhile, the RBI on Wednesday gave a boost to banks by announcing that from December 10, it was ending the 100% incremental cash reserve ratio requirement imposed after demonetization as part of a liquidity management operation to handle the return of the banned notes into the system.

The liquidity released by the discontinuation of the incremental CRR is expected to be absorbed by a mix of market stabilisation scheme issuances and liquidity adjustment facility operations. Brokers said sentiment remained upbeat as investors prepared for fresh bets in anticipation of a rate cut. With the RBI having done what it did, it is for both the Government and the central bank to work together for growth. “All possible efforts and measures are being taken to mitigate difficulties”.

With crash crunch continuing, the RBI promised to maintain steady supply of new currency to ease the situation.

This will be the first monetary policy review after demonetisation of old Rs 500 and Rs 1,000 currency notes following which banks witnessed surge in deposits. Public has been given time to exchange/withdraw the notes by December 30.

Overall, there is possibility of double counting of 10-15 per cent in banks deposits, the report said.

Near-term disruptions in cash-sensitive sectors such as retail, hotels, and restaurants are going to transiently impact demand for commercial space, although with a fresh supply of cash these problems will cease to exist.

SBI chairperson Arundhati Bhattacharya seemed unhappy by the move.

This policy suggests that no matter how hard a central bank tries to impart an element of consistency to its policy rate decision and related communication, stakeholders are often in store for a surprise.

For industrial sector, Dr Raju said the banks should lend more because there is demand and bank should meet the demand.

The central bank blamed a decision to move the press conference to a small venue.