RBI deputy governor Subir Gokarn ruled out any cut in the SLR saying, “Reducing SLR will not create any additional capacity in the system at this point of time, because of there is surplus. If SLR is close to the limit, then a reduction is possible, and may have created capacity. But given the situation all instruments are on the table”
Mumbai: The Reserve Bank of India (RBI) today hinted at another reduction in the cash reserve ratio (CRR) of banks to ease the severe liquidity in the system but ruled out a cut in the statutory liquidity ratio or SLR, saying that such a move will not create any additional cash flow, reports PTI.
“Space for (more) CRR cut still exists as we need to see significant fall in aggregate deficit,” RBI deputy governor Subir Gokarn told reporters on the sidelines of a function.
He did not indicate any timeline for the cut.
Mr Gokarn, however, ruled out any cut in the SLR saying, “Reducing SLR will not create any additional capacity in the system at this point of time, because of there is surplus. If SLR is close to the limit, then a reduction is possible, and may have created capacity. But given the situation all instruments are on the table.”
On 24th January, the RBI had cut CRR by 0.5 percentage points to 5.5%, releasing Rs32,000 crore into the system.
Since then, the fund crunch has only worsened.
Last Thursday, the strain on the system rose to high of Rs1.02 lakh crore. And going forward it will only increase as by 15th March companies will have to make advance tax payments which will drive out Rs60,000 crore from the system.
Another Rs12,000 crore is likely to go out of banks due to the ONGC auction last week, and a similar amount will be drained out on account of excise duty payment by companies.
Stating that liquidity deficit is partly structural and partly temporary, Mr Gokarn said, “Current call rates suggest that things are relatively stable (since) there is arbitrage in the market.
“Banks which have surplus SLR can borrow at the LAF (liquidity adjustment facility) and lend through call (money) market to banks which do not have excess SLR. So, the fact that SLR is skewed is not a cause of concern.”
Part of the liquidity crunch is temporary and partly structural and the reason why RBI conducting open market operations consistently is to address that, Mr Gokarn said.
“Part of the structural problem has arisen due to currency operation of the past three months...some of that has been offset by OMOs but it is structural and we are conscious of it,” he said.
When asked about his outlook on liquidity as advance tax payment is nearing, Mr Gokarn said, “We are conscious of the advance tax payment-related stress on the liquidity system.”
Even though he expressed the hope that crude will not climb too much given the general slowdown in the global economy, he said that rising oil prices will pose added risk to inflation projections.
“Oil prices going up poses a potential upside risk to inflation. On the other hand, growth has slowed—it is likely that producers don't have the pricing power which they had earlier,” Mr Gokarn said.
He also said that inflation management is the primary driver of monetary policy and that growth is not the core driver of monetary policy.
“Activity in the service sector expanded at a slightly slower clip in February, but a continued strong increase in new business and an uptick in the sentiment gauge suggests that activity will remain well-supported in the months ahead,” Leif Eskesen, chief economist for India & ASEAN at HSBC said
New Delhi: India’s services sector witnessed a modest dip in growth rate last month and also saw some job cuts for the first time in three months, reports PTI.
The HSBC Services Business Activity Index stood at 56.5 for the month of February, down from 58 in the previous month, despite an increase in new orders and uptick in business sentiments.
A score above 50 indicates growth in the sector, while a reading below 50 means the segment is contracting.
However, the HSBC survey found that a moderate rate of job cuts was indicated by manufacturers and the overall staffing levels also fell slightly.
The job cuts in February followed two consecutive months of a marginal increase in employment levels.
The HSBC India Composite Index—which covers both the manufacturing and service sectors—was at 57.8 for the month of February, down from nine-month high level of 59.6 in January.
On an optimistic note, Leif Eskesen, chief economist for India & ASEAN at HSBC said that the outlook for the sector looked “well supported”.
“Activity in the service sector expanded at a slightly slower clip in February, but a continued strong increase in new business and an uptick in the sentiment gauge suggests that activity will remain well-supported in the months ahead,” Mr Eskesen said.
According to the report, service companies in India were optimistic about rising activity over the next year, owing to higher new work intakes, alongside ongoing improvements in market conditions.
New business received by Indian service providers reported an increase during February, largely driven by new client wins.
Manufacturers reported a marginal strengthening in new order growth. The expansion of overall new work intakes accelerated slightly to reach an eleven-month high, HSBC said.
“As service sector activity is expected to stay relatively brisk and inflation is likely to hover above the comfort zone, the Reserve Bank of India (RBI) will have to approach the easing cycle cautiously. In addition, oil prices could have an impact on the timing as well as speed of rate cuts,” Mr Eskesen added.
India’s economy grew at 6.1% in the third quarter this fiscal, the slowest in over two years, prompting corporates and experts to press for faster reforms to boost industrial output.
The economy had expanded by 8.3% during the corresponding quarter a year ago.
Wheels India had earlier this fiscal entered into a technical agreement with Topy Industries
Wheels India, supplier to vehicles including cars, trucks and tractors, will invest over Rs70 crore this year on expansion.
A significant part of the investment will be for growing the exports market, the company's managing director Srivats Ram told PTI.
The company has plants at Padi and Sriperumbudur in Tamil Nadu; Pune, Rampur, Bawal and Pantnagar with overall annual capacity of 15 million wheels, he said.
While over 80% of the business comes from the domestic market, the company exports wheels for off-road construction equipments and agricultural applications to Japan, Korea, US, Brazil, Belgium, South Africa, China and Indonesia.
Wheels India had earlier this fiscal entered into a technical agreement with Topy Industries, a Japanese steel wheel manufacturer, for process, design and development of car wheels.
In the late afternoon, Wheels India was trading at around Rs599 per share on the Bombay Stock Exchange, 18.36% up from the previous close.