Bankers and analysts believe the RBI intervention may come anytime during the week as the payment of advance tax by companies will be due on 15th December. Such a move to lower CRR will result in release of about Rs15,000 crore into the system
New Delhi: With the last date for payment of advance tax drawing closer, pressure is mounting on the Reserve Bank of India to cut cash reserve ratio (CRR) by at least 0.25 percentage points to improve liquidity in the system, reports PTI.
Bankers and analysts believe the RBI intervention may come anytime during the week as the payment of advance tax by companies will be due on 15th December. This will result in substantial amount of money being sucked out from the market.
Such a move to lower CRR, which is the portion of deposit that banks are compulsorily required to keep with the central bank, will result in release of about Rs15,000 crore into the system.
“We expect 25-50 basis point cut in the CRR at any time.
It could happen during this week,” head of a leading public sector bank said.
The CRR has been left unchanged at 6% since May 2010.
However, the policy rates have been raised 11 times during the same period. In October, the central bank raised the repo rate by 25 basis points to 8.50% and the reverse repo rate moved up by a similar percentage to 7.50%.
Repo is the short-term rate at which the RBI lends to banks, while reverse repo is the rate at which it gets funds from banks.
According to senior official of another public sector bank, the liquidity infusion from the RBI looks very likely.
He said CRR cut may happen either during the week or on 16th December when the RBI will release its mid-quarterly review of the monetary policy.
Analysts also feel there would be liquidity easing from the central bank in a gradual manner.
“We expect the Reserve Bank of India to continue to ease liquidity, first through open market operations, and then by cutting the reserve requirements of banks,” Goldman Sachs said in a report.
“Given this backdrop of growth slowing and inflation peaking off, we are relieved that the RBI has finally begun Open Market Operations to cut the money market liquidity deficit and reduce undue pressure on interest rates,” said Bank of America-Merrill Lynch India economist Indranil Sen Gupta said.
While Moody’s has hinted as revising India’s growth forecast downwards, even its existing 7% economic growth projection for the current fiscal is less than that of many other global institutions and ratings agencies
New Delhi: Global ratings major Moody’s has said that tough times are ahead for the Indian economy and it may revise downwards the country’s growth forecast for 2011-12 to 6.5%, reports PTI.
“We may need to revise our 2012 growth outlook from the current rate of 7% and towards something like 6.5%... It looks like tough times are ahead,” Moody’s Analytics said in a report.
The country’s gross domestic product (GDP) growth slipped to 6.9% in the second quarter, the lowest in over two years. For the first half (April-September) of the fiscal, the average growth rate stood at 7.3%.
The economic growth in 2010-11 stood at 8.5%.
Growth in eight core infrastructure industries dipped to 0.1% in October, the lowest in five years.
The Reserve Bank of India (RBI) has already revised its growth projection for the Indian economy to 7.6%, from 8% earlier.
On Friday, finance minister Pranab Mukherjee said that GDP growth in the current fiscal is likely to be around 7.5%, far below the 9% projection made by the government in its pre-Budget survey.
Moody’s said that the economy is struggling under the weight of higher interest rates but this had failed to achieve the objective of cooling inflation, which have been above the 9% mark since December last year.
RBI has already hiked its key policy rates 13 times, totalling 350 basis points, since March 2010 to tame demand and curb inflation.
India Inc has blamed the repeated rate hikes, which have led to increased cost of borrowings, for hindering fresh investments and slowing down industrial growth.
“It is difficult to see this (economy) turning around any time soon, especially as the troubles in Europe appear to have some way still to play out,” Moody’s said.
While Moody’s has hinted as revising India’s growth forecast downwards, even its existing 7% economic growth projection for the current fiscal is less than that of many other global institutions and ratings agencies.
It is also less than the projections made by the Organisation for Economic Cooperation and Development (OECD), Centre for Monitoring of India Economy (CMIE), Crisil and ICRA, who have all put growth to be between 7.3% and 7.6%.
Finance major Citigroup last week revised downwards its growth forecast for the Indian economy to 7.1%, from the earlier estimate of 7.6%, for 2011-12 on account of global slowdown and domestic factors like impact of tight monetary policy.
As per the deal, BoI will acquire 25% stake from Bharti Enterprises and 26% from the Axa Investment Managers Asia Holdings. The fund house, however, did not disclose the transaction size
Mumbai: State-run Bank of India (BoI) on Saturday agreed to pick up 51% stake in Bharti Axa Mutual Fund for an undisclosed amount, reports PTI.
With the acquisition, Bharti Enterprises, which has about 25% stake in the fund house, will exit from the asset management business.
“Bank of India and Axa Investment Managers Asia Holdings (a subsidiary of Axa Investment Managers, part of the Axa Group) have agreed to enter into a joint venture in asset management business carried on by Bharti Axa Investment Managers,” a joint statement from the companies said here.
Bharti Axa Investment Managers is the asset management arm to Bharti Axa Mutual Fund, which is owned by telecom major Bharti Airtel and French financial services giant Axa Group.
“In the proposed joint venture, BoI will acquire 51% equity and the balance will be with the Axa Group,” the statement said.
Post regulatory approval, the bank will acquire 25% stake from Bharti Enterprises and 26% from the Axa Investment Managers Asia Holdings. The fund house, however, did not disclose the transaction size.
Following the stake transfer the name of the fund house will be changed to Bank of India AXA Investment Managers.
It is to be noted that the last month, Bharti Enterprises and Reliance Industries talks failed on the stake sale in Bharti AXA insurance companies due to differences over issues related to long term vision and joint governance.
With the acquisition of the stake BoI will re-enter mutual fund business. The bank was in the mutual fund business in 1990.
Of the six schemes launched by the fund, four had been redeemed and two schemes transferred to Taurus Mutual Fund after giving exit option to investors in 2004.
At present, there are eight MFs either fully- or partly-owned by banks along with overseas partners.
These include Baroda Pioneer Mutual Fund, Canara Robeco Mutual Fund, ICICI Prudential MF, Principal MF of PNB and SBI Mutual Fund, Axis MF, IDBI Mutual Fund and Union KBC MF of Union Bank.
There are 40 mutual fund players in the country with average asset under management of over Rs7 lakh crore.