RBI Keeps Repo Rate Unchanged at 6.5%

The Reserve Bank of India (RBI) on Friday maintained status quo on repo rate (short-term lending) at 6.5% in its fourth monetary policy review for 2018-19.
 
Following the move, the reverse repo rate (short-term borrowing) stands at 6.25%. Subsequently, the marginal standing facility (MSF) and the Bank Rate have also remain unchanged at 6.75%.
 
In a statement, the Reserve Bank said, "The decision of the Monetary Policy Committee (MPC) is consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of 2%, while supporting growth."

The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of plus or minus 2%, while supporting growth, the central bank says.

According to the central bank, actual inflation outcomes, especially during August, were below its projections as the expected seasonal increase in food prices did not materialise and inflation excluding food and fuel moderated.

It says, "While the projections of inflation for 2018-19 and first quarter of FY2019-20 have been revised downwards from the August resolution, its trajectory is projected to rise above the August 2018 print. The outlook is clouded with several uncertainties."

"First, the government announced in September measures aimed at ensuring remunerative prices to farmers for their produce, although uncertainty continues about their exact impact on food prices. Secondly, oil prices remain vulnerable to further upside pressures, especially if the response of oil-producing nations to supply disruptions from geopolitical tensions is not adequate. The recent excise duty cuts on petrol and diesel will moderate retail inflation. Thirdly, volatility in global financial markets continues to impart uncertainty to the inflation outlook. Fourthly, a sharp rise in input costs, combined with rising pricing power, poses the risk of higher pass-through to retail prices for both goods and services."

"Firms covered under the Reserve Bank's industrial outlook survey report firming of input costs in second and third quatr of FY2018-19. However, global commodity prices other than oil have moderated, which should mitigate the adverse influence on input costs. Fifthly, should there be fiscal slippage at the centre and/or state levels, it will have a bearing on the inflation outlook, besides heightening market volatility and crowding out private sector investment. Finally, the staggered impact of house rent allowance (HRA) revision by the state governments may push up headline inflation. While the MPC will look through the statistical impact of HRA revisions, there is need to be watchful for any second-round effects on inflation. The inflation outlook calls for a close vigil over the next few months, especially because the output gap has virtually closed and several upside risks persist," RBI added.
 
Dr Pami Dua, Dr Ravindra H Dholakia, Dr Michael Debabrata Patra, Dr Viral V Acharya and Dr Urjit R Patel voted in favour of keeping the policy rates unchanged. Dr Chetan Ghate voted in favour of hiking rates by 25 bps.
 
The next meeting of the MPC is scheduled between 3rd to 5 December 2018.

Here are the latest policy rates following MPC review… 
 
Repo Rate: 6.50%
Reverse Repo Rate: 6.25%
Bank Rate: 6.75%
 
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Chanda Kochhar quits ICICI Bank, Sandeep Bakshi is the new chief
Chanda Kochhar has quit ICICI Bank with immediate effect, says a regulatory filing from the bank. The board of ICICI Bank has decided to appoint Sandeep Bakshi as managing director and chief executive for next five years. 
 
"The board of directors of ICICI Bank, accepted the request of Ms Kochhar to seek early retirement from the bank at the earliest. The board accepted this request with immediate effect. The enquiry instituted by the board will remain unaffected by this and certain benefits will be subject to the outcome of the enquiry. Ms Kochhar will also relinquish office from the board of directors of the Bank's subsidiaries," the Bank said in the regulatory filing.
 
Separately, the Bank says, owing to health reasons MD Mallya its independent director had also resigned from the board.
 
Ms Kochhar is facing allegations of conflict of interest over a loan to Videocon Group that had in turn lent to a company part-owned by her husband.

The decision of the 56-year-old brings to an end her nine-year reign as the top executive of the bank.

In 2009, Ms Kochhar was appointed as MD and CEO of the bank and has been responsible for the bank's diverse operations in India and overseas.

Her alleged conflict of interest came out in the open in March this year after media reports referred to a Rs3,250-crore loan granted by ICICI Bank to Videocon Group, whose chairman Venugopal Dhoot had business links with her husband Deepak Kochhar. It was alleged that Mr Dhoot transferred a considerable portion of the loan to a company he jointly owned with Mr Kochhar.

The media expose was based on a complaint filed by a whistleblower, who flagged Ms Kochhar's alleged impropriety and conflict of interest in a letter to the Prime Minister and the Finance Minister.

The bank initially termed the charges against Ms Kochhar as "malicious and unfounded rumours" but after relentless public gaze, and regulatory pressure, the lender ordered a probe into the whole issue.

In 2012, a consortium of 20 banks and financial institutions sanctioned credit facilities to the Videocon Group for a debt consolidation programme and for its oil and gas capital expenditure programme aggregating to about Rs40,000 crore.

Currently, Supreme Court's former judge BN Srikrishna is heading an independent inquiry into the allegations.

On 30th May, the bank had announced that its board decided to institute a 'comprehensive enquiry' to look into an anonymous whistleblower's complaint alleging that Ms Kochhar had not adhered to provisions relating to the bank's "code of conduct".

In June, Ms Kochhar decided to proceed on leave.

Thereafter, Mr Bakshi was appointed as the wholetime director and chief operating officer (COO) of ICICI Bank.

You may also want to read...
Kochhars’ business links with Videocon dates back to early 1990s at least
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COMMENTS

Deepak Narain

2 weeks ago

Big people have big contacts and they are seldom punished in the real sense. Laws, courts and punishments are designed for the small fries.

Mohan Krishnan

2 weeks ago

Even Late Ms. Phoolan Devi must be turning at her grave.

V Ramesh

2 weeks ago

Why did she want to be re-elected to the Board of ICICI Securities just a few weeks ago, if she as going to quit?

Hotel Leelaventure Defaults in Principal Redemption of Rs22.50 crore
Hotel Leelaventure Ltd has defaulted in payment of principal redemption of Rs22.50 crore that was due on 30 September 2018.
 
In a regulatory filing, Hotel Leelaventure says, "The Company's operating cash flows are not sufficient to service its term loans and non-convertible debentures (NCDs) and the funds of the Company are escrowed with its lenders and the inflows and outflows are also monitored by the lenders." 
 
"The Company is evaluating various options for a viable restructuring, including sale / monetization of non-core assets, sale of hotels, equity infusion and debt refinancing by investors,' Hotel Leelaventures added.
 
In December 2008, the company had issued secured redeemable non-convertible debentures on private placement basis aggregating to Rs90 crore to Life Insurance Corp (LIC) of India. 
 
Hotel Leelaventures has an outstanding of Rs13.80 crore and principal redemption outstanding of Rs67.50 crore. 
 
At 12.22pm Thursday, Hotel Leelaventures was trading 1% down at Rs14.14 on the BSE, while the benchmark Sensex was 2% down at 35,265.
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COMMENTS

R Balakrishnan

2 weeks ago

What a promoter!! Trace the history of the "Captain" and the dirt spills out even before this company was born. Laced with money from banks, a family built its fortunes

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