The monetary policy committee’s (MPC) decision to keep the policy rate unchanged in its today’s meeting was not a surprise. This is so as it had taken the risk to reduce rates in its last meeting and the, then stated, threat of rise in inflation has actually played out. The threat was first stated by MPC in Feb’17 when its policy stance changed from “accommodative” to “neutral”. CPI since then has moved from about -0.5% in Feb to over 3% in Aug, in line with its projections, and there is not much reason to believe its projections would go wrong for the rest of the year. Continue reading
The promulgation of the Ordinance yesterday for resolution of Non Performing Assets (NPAs) is another measure to tackle the crisis gripping the banking sector. Yet, the ordinance could be another dead ball and nothing that one can hope would work wonders for lack of market participants. A look at the implication of the ordinance...Continue Reading
NPAs of the banking sector, especially the public sector continue to remain high, estimated at about 12% for PSBs. While various measures have been taken to resolve the issue, none seems to have worked so far. This has led to the proposal of creating a public sector asset rehabilitation agency (PARA) by the Economic Survey, also supported by RBI. How would PARA operate and can it solve the problem. A look..Continue Reading
Belying the expectations of a rate cut, the monetary policy committee (MPC) has not only decided to keep the rates unchanged in its meeting today but more importantly, has shifted its stance from “accommodative” to “neutral’. This is “to assess the transitory effects of demonetization on inflation and the output gap”. The shift marks a significant reversal of policy as it had maintained “accommodative’ stance all through the year. A look at the reason for the same..
While the nation adjusts to the new normal arising out of the historic demonetization and debates its merit/demerit, it also has another important fall-out. The move can lead to huge bonanza for government in the form of sharp increase in the transfer from RBI. This would be equivalent to the amount of Rs 500 and Rs 1,000 notes that does not come up for replacement. Let’s see how..