- Wealth PMS (50L+)
There is no RBI Rate Cut. There is no CRR cut. The RBI, in its mid-quarter review of monetary policy, decided that the situation warranted no change in any of the rates. I was partly there; I expected no CRR cut, and either a zero or 50 bps rate cut, even if there was no case for a rate cut.
The stock markets have taken it badly with bank stocks down 3%. The recent surge in bank stocks has been on the hope, no, strong belief that RBI has to cut rates. Even I thought RBI would cave, and it turned out they didn’t.
The review statement is brilliant, but longer than necessary, perhaps. In simple terms:
There’s an export refinance system, where the RBI will give money to banks against their lending against exports. Currently they can refinance 15% of their export lending, but RBI has, in this mid-term review, raised the refinance limit to 50%. 30,000 crores will be added to the system in this way – an effective "easing" of about 0.5% of total bank assets. In effect money will go to finance exports which will bring in dollars. But we’ll have to see which banks benefit, and the effect will be uneven.