Description:
Speaker Info: Nirav Karkera is the Head of Research at Fisdom . He is known to look beyond just numbers and identify wealth-creation opportunities in the Indian capital markets. A former U.S. Oil & Gas, Chemicals credit analyst with a globally-renowned credit rating agency, he has a penchant for translating dynamic economics into wealth propositions. Nirav specializes in generating risk-optimal wealth for investors through strategic as well as tactical play with equity and fixed income assets. He is up, anytime, for an intellectual debate around anything that pertains to business, economics & wealth. He can be reached at nirav@fisdom.com
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TRANSCRIPT:
Hi guys, finally RBI has concluded with its 5th by monthly annual monitory policy meet.
so here are the few key takeaways about the RBI monitory policy meet.
In line with our expectations the rates have remained unchanged and at the same time, even the stands remain constant at calibrated tightening. Here are a few important takeaways that we noticed in the policy meet.
1. Along with the rates being unchanged the outlook or the forecast for the inflation has actually dropped to 2.7 to 3.2% as a range for the second half of FY19now this come the back of severe deflation on food grains what is more surprising is the MSP effect that we all have been waiting for doesn’t seem to have played out much all this while.
The next important thing is RBI has decided to reduce it statutory liquidity ratio for the banks by 25 bits starting January 2019 and expects to continue it for a few more quarters at least till it matches it up with the NDTL of the banks.
So lets understand what could have been the thought and RBIs this decision to cut the SLR so now is the time when GDP growth forecast remains constant at 7.2% and at the same time the forecast for inflation has actually dropped to a much much lower range t 2.7% to 2.3% now within such dynamics SLR remains to be a key tool in the hands of the RBI to facilitate high credit offtake and expansion of liquidity within the system so that in the SLR basically leaves the bank a lot more to lend and at the same time expand credit and consequently increase growth and demand within the economy.
So this move seems to be a classic move by the RBI actually facilitate more robust economy wherein growth and demand expects from previous levels right now we do not see any raid cut on the way and at the same time we would actually watch out for how this SLR cut spans out and reflects in larger macroeconomic of India.
RBI has finally decided to start cutting the SLR or the Statutory liquidity ratio by 25 bits every calendar quarter cutting January 2019.
So what is SLR basically or what is statutory liquidity ratio?
Let me break it down for you in a very simple fashion.
So banks collect deposits from all depositors and is liable to pay it back to the depositors as and when depended now to ensure that there is never a run on the bank RBI mandates that every bank parks a certain % of its total deposits with the RBI in exchange of which they receive RBI bonds. So currently the SLR was 19.5% and the target is to reach 18% over the next6 quarters by cutting 25 bits each calendar quarter.
