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The government is at odds with the Reserve Bank of India (RBI) over proposed regulations that would require banks to increase their reserves for infrastructure loans and digital retail deposits. Concerns have been raised that these higher provisioning requirements could hinder credit growth, especially as banks are already facing challenges in raising deposits.
Inflation poses a significant threat to the real economy, particularly impacting industry and exports, according to the Reserve Bank of India's November bulletin. The October CPI inflation was unexpectedly high, following a concerning spike in September, highlighting the risks of complacency after sub-target outcomes in July and August. Urban consumption demand and corporate earnings are already feeling the effects, raising alarms about unchecked inflation's potential consequences.
India is expanding its mobile-payment linkages with several countries, according to a senior official from the Reserve Bank of India. Current arrangements include partnerships with Sri Lanka, Bhutan, and Nepal, with ongoing discussions for collaborations with the UAE and other neighboring nations.
Pressure is mounting on the Reserve Bank of India (RBI) to cut interest rates, particularly as Governor Shaktikanta Das"s term approaches its end. The Chief Economic Advisor has suggested that the Monetary Policy Committee (MPC) might consider excluding food inflation from its 4% target, arguing that such prices are influenced by factors beyond monetary policy. This debate comes despite robust economic growth and a lack of urgency for rate cuts, reflecting ongoing tensions between economic data and political expectations.
Economists are cautioning the Reserve Bank of India (RBI) against cutting interest rates amid high inflation, following comments from Finance Minister Nirmala Sitharaman advocating for more affordable bank rates. They warn that premature rate reductions could undermine inflation control gains, especially with a significant fiscal deficit. As the RBI approaches its December monetary policy meeting, the focus remains on Governor Shaktikanta Das"s decisions regarding interest rates.
Maharashtra"s municipal corporations are experiencing significant fiscal health, with a budgeted revenue surplus of Rs 11,104 crore for FY24, the highest among 231 corporations. The Reserve Bank of India reports that the top 10 municipal bodies account for over 58% of total revenue receipts, highlighting their crucial role in local governance as the state approaches assembly elections on November 20. Despite a dip during the pandemic, the overall consolidated budgets indicate a strong recovery and robust urban governance.
The Indian rupee fell to a record low of 84.4150, driven by strong dollar demand from foreign banks and local importers, particularly oil companies. Despite this decline, intervention from the Reserve Bank of India, with state-run banks offering dollars, helped stabilize the currency. The dollar index rose slightly to 106.3, while Asian currencies showed mixed performance.
The government is expressing concerns over key proposals from the Reserve Bank of India (RBI) that could impact credit growth. The RBI suggested that banks set aside 5% of loans for infrastructure projects under construction, raising worries about increased funding costs. Additionally, a proposal for banks to maintain an extra 5% "run-off" on digitally accessible retail deposits aims to help manage risks from potential heavy withdrawals through online banking.
The government is poised to extend the term of RBI Governor Shaktikanta Das for a second time, potentially making him the longest-serving chief since the 1960s. Currently, his term is set to end on December 10, and no other candidates are being considered for the position. This extension would surpass the typical five-year tenure, as Das has already served longer than recent governors.
Food prices surged to a 15-month high of 10.9% in October, contributing to a retail inflation rate that exceeded the Reserve Bank's tolerance at 6.2%. This spike, alongside rising core inflation at 3.7%, poses significant challenges for the Monetary Policy Committee, likely prompting a cautious approach in the December meeting and delaying anticipated rate cuts until February.
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