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Most economists anticipate a 25-bps interest rate cut in February 2025, with the probability now at 60%, down from 68% in October. Confidence has waned due to rising geopolitical uncertainties, high inflation, and stable growth, while the likelihood of a December cut has dropped to 0%.
The RBI has reported a staggering 300% increase in counterfeit Rs 500 notes from FY19 to FY24, with FY22 experiencing the most significant annual rise, doubling from 39,453 million to 79,669 million pieces. Additionally, counterfeit Rs 2,000 notes, which ceased production on September 30, 2023, surged by 166% in FY24, escalating from 9,806 million to 26,035 million pieces.
The RBI faces a challenging balance between growth and inflation, with October CPI inflation rising to 6.21%, the highest in 14 months. Despite calls from government officials for a rate cut to stimulate credit and investment, recent data shows a paradoxical increase in credit growth, raising questions about the effectiveness of higher borrowing costs.
The Reserve Bank of India (RBI) has reportedly instructed certain lenders to reduce speculative bets against the rupee. This marks a shift from previous years, as the RBI had not mandated banks to cut their positions, despite earlier restrictions on adding long positions on the dollar-rupee.
The Solicitor General of India has confirmed that the National Financial Reporting Authority (NFRA) holds the exclusive authority to issue Standards on Quality Management for auditing, as the Institute of Chartered Accountants of India (ICAI) lacks such powers under the ICAI Act of 1949. This opinion has received backing from key regulators, including the CAG, RBI, and SEBI, emphasizing NFRA's role as the statutory regulator in auditing and accounting.
India's central bank is actively working to maintain currency stability to protect the economy from global financial risks and spillovers. This approach aims to ensure financial stability amid increasing international uncertainties.
Bond investors have faced negative returns since 9/11 and COVID, prompting demands for higher coupon rates. Rising bond yields indicate potential increases in borrowing costs, which could impact industrial output. Both the US Federal Reserve and the RBI recognize that higher yields can help prevent capital outflows.
RBI Governor Shaktikanta Das urged bank boards to enhance their internal governance frameworks to combat unethical practices like mis-selling and inadequate KYC verification. He emphasized that while such practices might offer short-term benefits, they pose significant long-term risks, including reputational damage and financial penalties. Das highlighted the current transitional phase of the Indian banking sector, filled with both opportunities and challenges.
A debate has emerged between the government and the RBI regarding the effective interest rate, marking a notable divergence in views for the central bank chief, Das. This situation recalls past conflicts, such as the one between finance minister P. Chidambaram and RBI governor Duvvuri Subbarao, highlighting the ongoing complexities of India's interest rate policies. The key question remains whether a repo rate cut is imminent.
India's inflation rate is anticipated to decline starting in December, according to Deepak Parekh, former chairman of HDFC. This sentiment is echoed by Reserve Bank of India Governor Shaktikanta Das, who noted that while inflation has exceeded the RBI's medium-term target and breached the 6 percent upper tolerance band in October, moderation is expected.
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