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RBI to take hawkish stance by end-2018, hike rates early next year

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Bengaluru: The Reserve Bank of India will keep monetary policy steady at its April meeting but shift to a hawkish stance by the end of this year and raise interest rates early in 2019 as inflation pressures build, according to a Reuters poll of economists.
All 61 economists polled between March 23-28 expected the RBI to hold the repo rate at 6.00 per cent and the reverse repo rate at 5.75 per cent at its April 4-5 policy meeting.
The RBI is expected to keep rates steady for the rest of this year
After a slowdown in growth through much of last year, India is on an upswing and reclaimed top spot as the fastest growing major economy in the final quarter of 2017, outpacing China.
Inflation on the other hand has eased slightly, but still projected by the central bank to remain above its 4 per cent medium-term target in 2018.
“The recent strength of the economy has belatedly shifted discussion from whether the RBI might cut policy rates again to whether it should hike,” noted Shilan Shah, senior India economist at Capital Economics.
The RBI is expected to change its stance toward policy tightening by year-end, according to 60 per cent of 33 economists, including four respondents who thought the shift would come as early as its June meeting.
“With growth-inflation data likely to be higher after April, we believe there is a risk of more hawkish rhetoric at meetings in June and beyond, including a change in policy stance,” wrote Sonal Varma, chief India economist at Nomura.
The latest consensus is for the RBI to hike the repo rate and the reverse repo rate by 25 basis points in the first three months of 2019 and follow it up with another one in the quarter through to end-December.
Just last month, the consensus was for the central bank to hold fire until at least the second half of 2019.
“The forecast for inflation suggests that after a temporary decline, which we have already seen, inflation will move slightly higher and this will force a hike,” said Dariusz Kowalczyk, senior economist for ex-Japan Asia at Credit Agricole CIB.
After hitting a low of 1.46 per cent in June 2017, consumer price inflation steadily rose to a 17-month high in December. However, February’s inflation print showed inflation at 4.4 per cent, giving the RBI a breather.
According to the central bank’s own projections, inflation is likely to average 5.1-5.6 per cent for the first half of the 2018-19 fiscal year, before hovering around 4.5 per cent for the remainder of the year.
While the median consensus of economists predicts a rate hike early next year, almost a third of respondents forecast the RBI will lift rates by the end of September.
Several of them also expect another rate hike before end-2018.
Against a backdrop of government fiscal slippage, the RBI would focus on “price stability”, higher bond yields and sticky inflation near the upper band of its target, according to Vishnu Varathan, head of economics and strategy at Mizuho Bank.
“The fact that evidence of underlying inflation is picking up…should tilt them towards one rate hike to calibrate policy,” Mizuho’s Varathan said.
“The growth story is also going to align nicely with the RBI’s position because we are coming off a soft base after the demonetization and GST impact … the policy decision becomes less of a dilemma and the clarity with which they need to act solidifies in the second half of this year.”
If the RBI does raise rates when expected, it would follow other major central banks which are already tightening policy.
The US Federal Reserve raised rates in March and is expected to follow it up with three more hikes this year, according to a separate Reuters poll.


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MPC to meet six times during 2019-20: RBI

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Mumbai: The Monetary Policy Committee (MPC), which decides on key interest rates, will meet six times during the next financial year, the Reserve Bank of India (RBI) said.

The first meeting of the six-member MPC to decide on the first bi-monthly monetary policy statement for 2019-20 will be held from April 2 to 4.

The policy will be announced on April 4. Headed by RBI Governor Shaktikanta Das, the committee also includes two representatives from the central bank and three external members.

 

The external members are Indian Statistical Institute professor Chetan Ghate, Delhi School of Economics Director Pami Dua and Indian Institute of Management-Ahmedabad professor Ravindra H Dholakia.

According to the schedule provided by the RBI, the second meeting of the MPC in the next fiscal will be held on June 3, 4 and 6; third meeting (August 5-7); fourth meeting (October 1, 3 and 4); fifth meeting (December 3-5) and sixth meeting (February 4-6, 2020).

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SBI raises Rs 1,251 crore by issuing Basel III-compliant bonds

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New Delhi: The country’s largest lender State Bank of India (SBI) said it has raised Rs 1,251.30 crore by issuing Basel III-compliant bonds.

“The Committee of Directors for Capital Raising at its meeting held today on 22 March 2019 deliberated and accorded approval to allot 12,513 non-convertible, taxable, perpetual, subordinated, unsecured Basel lll-compliant additional tier-I bonds, for inclusion in additional tier-I capital of the bank…aggregating to Rs 1,251.30 crore,” SBI said in a regulatory filing.

The bonds with a face value of Rs 10 lakh each bears a coupon rate of 9.45 per cent per anum payable annually with call option after 5 years or any anniversary date thereafter, it said. The bonds were subscribed on Friday, it added.

 

State Bank of India (SBI) also said the central board of the bank at its meeting held has accorded its approval for extension of validity period for raising equity capital of up to Rs 20,000 crore from market by way of follow-on public offer, qualified institutional placement, preferential allotment, rights issue or any other mode or a combination of these till March 31, 2020.

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Sebi fines 4 entities Rs 27 lakh for fraudulent trading in BSE stock options

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New Delhi: Markets regulator Sebi imposed a total penalty of Rs 27 lakh on four entities for indulging in fraudulent trade in illiquid stock options segment of BSE.

Umapati Oil Mill and Ginning Factory, Yudhbir Chhibbar, Kasturbhai Mayabhai Pvt Ltd and Vimladevi Shyamsunder Khetan are the four entities, according to Sebi’s separate orders.

fter observing a large-scale reversal of trades in the BSE’s illiquid stock options segment, Sebi conducted a probe from April 2014 to September 2015.

 

Following the probe, the regulator found that the trades executed by the entities were not genuine as they were reversed within few seconds with same counter parties with significant difference in price, resulting in profit to the entities.

Securities and Exchange Board of India (Sebi) said it was a deliberate attempt to deal in such a fashion and not a mere coincidence.

The trades executed by the entities were not genuine and created an appearance of artificial trading volumes, thereby violating PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations, Sebi noted.

Accordingly, a fine of Rs 8.7 lakh and Rs 8.4 lakh were imposed on Yudhbir Chhibbar and Vimladevi, respectively while a penalty of Rs 5 lakh each was levied on Umapati Oil Mill and Kasturbhai Mayabhai Pvt Ltd, totalling Rs 27.1 lakh.

In a separate order, Sebi imposed a total fine of Rs 6 lakh on four promoters of Artech Power Products for delayed disclosures to exchanges regarding their change in the shareholding in the company.

Ranjith Vijayan, I V Vijayan, Repsy Vijayan and Resmi Vijayan are the four promoters, according to Sebi’s order.

The promoters have deprived the vital information to the public by non-disclosure /delayed disclosure as mandated by the Takeover Regulations, Sebi noted.

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