Third Quarter Review of Monetary Policy 2013-14 : Statement by Dr. Raghuram G. Rajan, Governor, Reserve Bank of India

Good morning and welcome to the Reserve Bank.

Today, on the basis of an assessment of the current and evolving macroeconomic situation, we have decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 8.0 per cent.

2. Let me first address the balance of risks that confronts us in the evolving macroeconomic outlook. The slowdown in the economy is getting increasingly worrisome. Our current assessment is that growth is likely to lose momentum in Q3 of 2013-14, with industrial activity in contractionary mode, mainly on account of manufacturing. Lead indicators of services also suggest a subdued outlook, barring some pick-up in transport and communication activity. On the other hand, agricultural performance has so far been robust, and the strong pick-up in rabi sowing indicates that this should be sustained.

RBI surprises with 25 basis points rise in Repo Rate

 

Third Quarter Monetary Policy Review 28th Jan 2014

Mr. Raghuraman Rajan, Governer of Reserve Bank of India surprised the Banking circle with

Increase in the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.75 per cent to 8.0 per cent; and consequently, the reverse repo rate under the LAF stands adjusted at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent.

But the cash reserve ratio (CRR) of scheduled bankskept unchanged at 4.0 per cent of net demand and time liability (NDTL).

The banking circle and the market was expecting the RBI Governer would keep the rates unchanged.

Following the recommendation of the Dr. Urjit Patel Committee, monetary policy reviews will ordinarily be undertaken in a two-monthly cycle, consistent with the availability of key macroeconomic and financial data. Accordingly, the next policy review is scheduled on Tuesday, April 1, 2014.

Allahabad Bank net rises 4.6% to

Allahabad Bank reported a 4.6% increase in net profit to Rs 325 Cr for the quarter ending December 2013, compared to the same period last year. While net interest margin (NIM) remained flat at 2.75%, a 59% jump in ‘other income’ at Rs 542 Cr, due to “recoveries in written-off accounts”, contributed to profit growth. During the quarter, NPAs worth Rs 389 Cr were sold to asset reconstruction companies. According to the bank’s CMD Shubhalakshmi Panse, profits were subdued on account of higher provisioning for NPAs, possible wage revision and mark-to-market losses. Provisions and contingencies rose 29% to Rs 557 Cr. The provision coverage ratio was 42.93%. During the period, gross NPAs rose 256 bps to 5.47% (from 2.91%) of total advances. Net NPAs stood at 4.19%. In absolute terms, gross NPAs jumped 113% on a yearly basis to Rs 7,512 Cr, while net NPAs rose 128% to Rs 5,651 Cr.