Indian stock markets opened higher on Wednesday, with gains led by the information technology and pharmaceutical sectors as investors anticipated the Reserve Bank of India’s (RBI) monetary policy decision, expecting the central bank to hold interest rates steady.
As of 9:44 a.m. IST, the Nifty 50 index rose by 0.25% to 25,073 points, while the S&P BSE Sensex climbed 0.18% to 81,778.84. The RBI is expected to maintain key policy rates unchanged for the tenth consecutive meeting, as it continues its effort to keep inflation in check.
When the policy announcement was announced at 10:00 a.m. IST stating that the RBI’s MPC panel voted in favour of keeping the repo rate unchanged at 6.5%, the market sentiment slightly reversed but is expected to improve once the RBI Governor Shaktikanta das gives his press briefing at 12 p.m. on Wednesday.
Eleven of the 13 major sectors posted gains, with small- and mid-cap stocks climbing roughly 1%. The IT sector rose 0.7%, marking its fourth consecutive day of gains, as U.S. labor market data eased fears of a recession in India’s key export market. The pharma sector also jumped 1.3%, led by Divi’s Laboratories, which surged 5% following a “buy” rating from Citi.
Torrent Power saw a notable 8% jump after securing two significant orders from the Maharashtra State Electricity Distribution Company to build 2000 MW of energy storage capacity.
In a pivotal move, the Reserve Bank of India (RBI) has kept its benchmark interest rates unchanged at 6.5%, but shifted its policy stance to neutral, signaling a potential rate cut in December. The announcement came after a three-day monetary policy committee (MPC) meeting that concluded today.
Five out of the six members of the MPC voted to maintain the current repo rate, while all six unanimously agreed to adopt a neutral stance—marking the first such shift in two years, according to RBI Governor Shaktikanta Das. The neutral stance indicates the central bank is now equally poised to either raise or lower rates, depending on future economic conditions, with a focus on balancing inflation and growth.
This decision aligns with a Mint survey, where 9 out of 10 economists predicted no change in rates this time.
Governor Das will address the media at noon today to provide further details.
This is the first MPC meeting after three new members—Bhattacharya, Kumar, and Singh—were appointed by the government, replacing outgoing members Shashanka Bhide, Ashima Goyal, and Jayanth R. Varma.
As the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meets from October 7-9, experts are predicting that the central bank will maintain the current policy rates. The decision is expected to be influenced by persistent inflationary pressures and uncertainties in the global economic landscape. While the U.S. Federal Reserve has recently cut rates, signaling a potential easing cycle, the RBI is likely to adopt a cautious stance, prioritizing inflation control over rate cuts, according to analysts.
The primary factor guiding the MPC’s expected decision to maintain the status quo is the central bank’s ongoing battle against inflation. Consumer Price Index (CPI) inflation, which remains above the RBI’s 4% target, has seen fluctuations largely driven by food price volatility. This has led policymakers to tread carefully, avoiding premature rate cuts that could reignite inflation.
Ajit Banerjee, President and Chief Investment Officer at Shriram Life Insurance, noted that the RBI will likely wait until it is certain that inflation has been durably controlled. “The committee is expected to hold rates steady until there’s clear evidence that inflation, especially food-driven spikes, are less of a threat,” he explained.
India’s GDP growth, while not alarmingly low, has been moderate. The first quarter’s 6.7% growth was influenced by a slowdown in government investment, mainly due to election-related factors. With government capital expenditure resuming in the second quarter, GDP growth is expected to align with RBI’s earlier projections. However, experts say the domestic growth trajectory doesn’t warrant urgent rate cuts at this stage.
Mandar Pitale, Head of Treasury at SBM Bank India, pointed out that while growth remains robust, the MPC will likely stay cautious. “Strong GDP growth numbers in India reduce the immediate pressure on the RBI to cut rates. The focus is more on ensuring that inflation stabilizes over the long term,” Pitale added.
Global Economic Uncertainty and Fed Influence
The global economic environment also weighs heavily on the MPC’s deliberations. Recent rate actions by developed economies, particularly the Federal Reserve, have added complexity to the RBI’s decision-making process. While the Fed’s rate cut could suggest a global trend toward monetary easing, the MPC is expected to be wary of following suit too quickly.
Pitale highlighted that global factors, such as inflation trends in developed markets and the Fed’s forward guidance on rates, would play a critical role in the committee’s discussions. “The RBI is aware of the nonlinear guidance coming from global central banks, which creates uncertainties about the future direction of monetary policy globally,” he said.
While no immediate rate cuts are expected, the tone of RBI Governor Shaktikanta Das’s commentary could signal future policy direction. A dovish shift, with hints of a more neutral stance, may emerge if inflation moderates in the coming months. However, the reconstitution of the MPC, with three new external members, makes a drastic policy shift unlikely in this meeting.
Banerjee suggested that while significant changes in this meeting are improbable, a dovish tone could set the stage for future rate cuts, provided inflation eases. “A shift in the MPC’s stance isn’t entirely off the table, but the immediate focus remains on inflation management,” he said.
The RBI’s decision to maintain its restrictive policy is a calculated move to ensure inflation is brought under control, aligning with its long-term target. As global economic dynamics remain uncertain and domestic inflation continues to challenge policy stability, the central bank is likely to hold off on any major policy shifts in the near term.
In the coming months, both domestic inflation trends and global economic factors will determine whether the RBI begins to ease its policy stance. For now, the central bank seems set on a cautious, wait-and-watch approach.
The Reserve Bank of India (RBI) has recently raised concerns over deficiencies in gold-lending practices, urging gold lenders to review their policies and practices and implement corrective measures within a three-month timeframe. This directive comes in the wake of a review conducted by the RBI, which revealed several irregularities in the gold loan sector.
Gold loans, which are granted against a pledge of gold ornaments and jewellery, have come under the RBI’s scrutiny as they defy the lending norms of other assets and often fail to contribute to overall growth.
The review, as well as the findings of the onsite examination of select supervised entities by the RBI, indicated several irregular practices in this activity. The major deficiencies include shortcomings in the use of third parties for sourcing and appraisal of loans, valuation of gold without the presence of the customer, inadequate due diligence, and lack of end-use monitoring of gold loans.
RBI’s Advisory Too Late?
The RBI has pointed out the lack of transparency during the auction of gold ornaments and jewellery on default by the customer, weaknesses in monitoring of loan-to-value, and incorrect application of risk-factors, among others. These irregularities were observed across various supervised entities, including commercial banks, small finance banks, urban cooperative banks, and non-banking financial companies (NBFCs).
In response to these findings, the RBI has advised lenders to comprehensively review their policies, processes, and practices on gold loans to identify gaps and initiate appropriate remedial measures in a timebound manner. The central bank has also emphasized the need for close monitoring of gold loan portfolios, especially in light of significant growth in the portfolios in certain entities.
The RBI’s directive also highlighted the need for entities to ensure that adequate controls are in place over outsourced activities and third-party service providers. The central bank has warned that non-compliance with regulatory guidelines will be viewed seriously and will attract supervisory action by the RBI.
Impact on the Gold Loan Sector
This warning on gold loan practices follows a similar caution issued by the RBI in August 2024, highlighting issues with home equity or top-up housing loans such as non-adherence to loan-to-value (LTV) ratios and lack of end-use monitoring. The RBI Governor, Shaktikanta Das, had then noted that such loans may lead to funds being deployed in unproductive segments or for speculative purposes.
The RBI’s advisory to gold lenders also highlighted several specific cases of irregularities or deficiencies with respect to gold loans being granted. These included instances where gold loans were given through partnerships with fintechs and business correspondents (BCs), and practices such as valuation of gold being carried out in the absence of the customer, credit appraisal and valuations being done by the BC itself, and gold being stored in the custody of BC.
The review also revealed a lack of a robust system for periodical LTV (loan-to-value) monitoring with instances of breach of regulatory LTV ceilings observed in some entities. In other instances, the application of risk weights was at variance with the prudential regulations. The end use of funds was also usually not verified for non-agriculture loans and there was a lack of proof or proper documentation obtained and retained in respect of agriculture gold loans.
The RBI’s directive has likely led to a negative impact on the share prices of major gold financing companies, as indicated by mentions of stocks slipping for companies like Muthoot Finance and Manappuram Finance. These companies would have to review and potentially tighten their practices, which could involve increased costs and possibly affect their short-term business operations. The directive also suggests increased regulatory scrutiny, which might lead to a more cautious approach by investors in the sector.
Otherwise, the RBI’s directive serves as a wake-up call for gold lenders to tighten their practices, lest the RBI may tighten the rules to maintain the stability of the financial system. Certainly, the directive is going to impact on gold loans segment of many banks and NBFCs.
Gold as Crisis Saver
Whether Covid-19 or Forex crisis, over the period gold remained the single instrument to save the nations to sustain and India stands to benefit from the gold as a reserve, as the case with many other central banks across the globe. From a low of 7% seen in CY20, the share has improved significantly to 26% at present.
As per World Gold Council report, Central Bank of Turkey was the largest buyer, followed by People’s Bank of China and Reserve Bank of India. This may be on account of attaching greater weight to gold’s value in crisis response, diversification of portfolio and credibility on account of store-of-value. But the value erodes when the asset changes hands from the owners to the lenders. Here, the RBI is quite cautious.
Internet banking facility to be started for Regional Rural Banks’ customers.
Regulation of offline payment aggregators proposed.
Repo Rate hiked to 5.90%
The repo rate, the rate at which RBI lends money to commercial banks, has been hiked by 50 basis points again. Considering the prevailing adverse global environment, resilience in domestic economic activity, uncomfortably high inflation level, the RBI has hiked the policy repo rate by 50 basis points, to 5.40%.
Consequently, the standing deposit facility (SDF) rate stands adjusted to 5.65% and the marginal standing facility (MSF) rate and the Bank Rate to 6.15%. The Monetary Policy Committee has decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth, stated RBI Governor Shaktikanta Das.
The Governor announced a series of four additional measures, as given below.
1. Discussion paper on Expected Loss-Based Approach to be released for loan-loss provisioning by banks
Banks currently follow incurred-loss approach, where provisions are made after stress has actually materialized, this is to be replaced by a more prudent approach which requires banks to make provisions based on assessment of probable losses.
2. Discussion paper on securitization of Stressed Assets Framework (SSAF) to be released.
Revised framework for securitization of stressed assets was issued in Sep 2021, it has now been decided to introduce a framework for securitization of stressed assets, this will provide alternate mechanism for securitization of NPAs in addition to existing ARC route.
3. Internet banking facility for customers of Regional Rural Banks.
RRBs are currently allowed to provide internet banking facility to customers subject to fulfillment of certain criteria, to spread digital banking in rural areas, these criteria are being rationalized, revised guidelines to be issued separately.
4. Regulation of offline payment aggregators.
Online Payment Aggregators (PAs) have been brought under the purview of RBI regulations since March 2020. It is now proposed to extend these regulations to offline PAs, who handle proximity/ face-to-face transactions. This measure is expected to bring in regulatory synergy and convergence on data standards.
Growth Projection – 7.0% for 2022-23
The Governor informed that the central bank’s growth projection for the Indian economy for 2022-23 is projected at 7.0 per cent with Q2 at 6.3 per cent; Q3 at 4.6 per cent; and Q4:2022-23 at 4.6 per cent, with risks broadly balanced.
The growth for Q1 of 2023-24 is projected at 7.2 per cent.
Against the current challenging global environment, economic activity in India remains stable, stated the RBI Governor. “While real GDP in first quarter of this year turned out to be lower than expectations, it is perhaps the highest among major global economies”, he added.
Inflation
Inflation inched up to 7.0 per cent in August from 6.7 per cent in July, stated the RBI Governor. Global geopolitical developments are weighing heavily on the domestic inflation trajectory, he said.
The RBI Governor stated that monetary policy has to carry forward its calibrated action on policy rates and liquidity conditions consistent with the evolving inflation growth dynamics. It must remain alert and nimble, he stated.
The government-run small savings schemes remained to provide the same interest rates since the past two years though the bank fixed deposit rates have considerably increased the interest rate.
The small savings schemes’ interest rates were last revised in the first quarter of 2020-21, though banks have drastically hiked their home loan and term deposit rates after the Reserve Bank of India (RBI) raised its repo rate by 140 basis points since May 2022.
Small savings schemes like Public Provident Fund (PPF), National Savings Certificate (NSC), Post Office Savings Scheme and Sukanya Samriddhi Yojana are vital savings instruments for the common man, as they provide long-term benefits.
Here are the current interest rates of key small savings schemes:
* Public Provident Fund (PPF): 7.1 per cent
* National Savings Certificate (NSC): 6.8 per cent
* Post Office Monthly Income Scheme: 6.6 per cent
* Sukanya Samriddhi Yojana: 7.6 per cent
* Five-year Senior Citizens Saving Scheme: 7.4 per cent
* Kisan Vikas Patra: 6.9 per cent
The RBI had brought down its benchmark repo rate by 75 basis points to 4.40 per cent on March 27, 2020 — just three days after a nationwide lockdown was announced but the government had not reduced interest rates of small savings schemes, keeping in mind the interests of the pensioners.
RBI sources said the government will monitor inflation as well as the liquidity position before taking any decision to raise interest rates of small savings schemes. “Depending on how much inflation rises and whether there is tightening of liquidity position in future, the government may take a call on small savings schemes rates,” said a senior banking official told IANS.
On June 30, 2022, the Finance Ministry had notified that interest rates of small savings schemes have been kept unchanged for the July-September quarter of the current fiscal, effective from July 1.
“The rates of interest on various small saving schemes for the second quarter of the financial year 2022-23, starting July 1, and ending September 30, shall remain unchanged from those notified for the first quarter (April 1 to June 30) for FY 2022-23,” the Finance Ministry notification had said.
As reported earlier, new Rs. 200 notes have entered the circulation with many ATMs being recalibrated to provide the notes which are similar in size to Rs.500 notes but vary in colour with the colour yellow dominating the appearance.
The Reserve Bank of India, the central bank, has described the ne note as the missing link in the demonetisation process ushered in since November 8, 2016. Unlike other developed countries which have machines to give away the change, India has no such plans nor is it feasible for RBI with varying inflation in some parts.
Following the ban on Rs. 1,000 and Rs. 500 notes to check tax avasion, the central bank had introduced Rs. 2,000 notes and new Rs. 500 notes and the missing Rs.1000-note will now be answered by the circulation of new Rs.200 notes.
In a press statement, RBI said, “The Reserve Bank of India will issue on August 25, 2017 Rs. 200 denomination banknotes in the Mahatma Gandhi Series, bearing signature of Urjit R Patel, Governor, Reserve Bank of India from select RBI offices, and some banks.”
The Rs.200 note, issued in a dimension of 66mmX146mm, has the Sanchi Stupa and the portrait of Mahatma Gandhi at the centre and the denominational numeral “200” with rupee symbol in green to blue.
With this Indian currency system now has Rs. 1, 2, 5, 10, 20, 50, 100, 200, 500 and 2,000 currency notes in circulation as of today. There is no word on a new Rs.1000-note. Even the Rs.50-note has been changed to new series with a new look and additional security features.
“To achieve the optimal system of currency that would minimise the number of denominations while increasing the probability of proffering exact change, especially at the lower end of denominations, there is a logical need to introduce the missing denomination of Rs. 200, which will make the present currency system more efficient,” RBI justified its move.
The note has similar features for visually impaired as in other notes — the intaglio or raised printing of Mahatma Gandhi portrait, Ashoka Pillar emblem, raised identification mark ‘H’ with micro-text Rs. 200, four angular bleed lines with two circles in between the lines both on the right and left.
Rs.200 note reverse side
Salient features of the New ₹200 Notes:
1. See through register with denominational numeral 200,
2. Latent image with denominational numeral 200,
3. Denominational numeral २०० in Devnagari,
4. Portrait of Mahatma Gandhi at the centre,
5. Micro letters ‘RBI’, ‘भारत’, ‘India’ and ‘200’,
6. Windowed security thread with inscriptions ‘भारत’ and RBI with colour shift. Colour of the thread changes from green to blue when the note is tilted,
7. Guarantee Clause, Governor’s signature with Promise Clause and RBI emblem towards right of Mahatma Gandhi portrait,
8. Denominational numeral with Rupee Symbol, ₹ 200 in colour changing ink (green to blue) on bottom right,
9. Ashoka Pillar emblem on the right,
10. Mahatma Gandhi portrait and electrotype (200) watermarks,
11. Number panel with numerals growing from small to big on the top left side and bottom right side,
12. For visually impaired: Intaglio or raised printing of Mahatma Gandhi portrait, Ashoka Pillar emblem, raised Identification mark H with micro-text ₹ 200, four angular bleed lines with two circles in between the lines both on the right and left sides.
13. Year of printing of the note on the left,
14. Swachh Bharat logo with slogan,
15. Language panel,
16. Motif of Sanchi Stupa,
17. Denominational numeral २०० in Devnagari.
As per data reported by the Reserve Bank of India (RBI), the number of cyber crime pertaining to credit card, ATM, debit card and Internet banking shows a marginal increase of 4.4% from 13,083 in 2014-15, to 13,653 in 2016-17.
RBI has issued Cyber Security Framework in Banks, mandating banks to put in place a Board-approved cyber-security policy, which covers the risks from cyber threats and the measures to address/ mitigate these risks.
RBI has issued instructions to banks for reversal of erroneous debits arising from fraudulent or other transactions, and for Board-approved bank policy to cover customer protection, the mechanism of compensating the customer for the unauthorised electronic banking transactions, and display of the same on the bank’s website, along with the details of grievance-handling / escalation procedure. Under the Banking Ombudsman Scheme, if a customer does not receive any reply within a period of one month after receipt of representation by the bank or is not satisfied with the reply given, he can file a complaint before the Ombudsman, who can ask the bank to pay compensation of up to Rs. 20 lakh to the customer for loss, suffered by the customer due to an act of omission of the bank, and also compensation of up to Rs. 1 lakh for mental agony and harassment.
This was stated by Shri Santosh Kumar Gangwar, Minister of State for Finance in written reply to a question in Rajya Sabha today.
The Ministry of Finance, Government of India through its Department of Financial Services(DFS) has asked all the Public Sector Banks(PSBs) and the Indian Bankers Association (IBA) to ensure hundred percent(100%) that deposits of new currency is properly reflected in the customers’ counterfoils.
In a letter addressed to all the Managing Directors (MDs) & Chief Executive Officers (CEOs)/Chairman cum Managing Directors (CMDs) of PSBs and Chairman, IBA, the DFS has stated that maintenance of records regarding deposit of SBN and Non-SBN, as the case may be, is essential both in the bank record as well as the customer’s record.
The letter further states though most banks providing correct information to the customers yet to ensure that it is done in 100% of cases without fail, all the bank branches in the country be alerted to reflect correctly the cash deposit in old and new currency and inform the customers about the same.
The Ministry has asked the MDs &CEOs/CMDs of PSBs and Chairman, IBA that this must be followed scrupulously and any deviation in this regard has to be prevented and if noticed, dealt with firmly and immediately.
The letter further states that to educate the public, banks may clearly display a prominent sign (including in the local language) in their respective branches requesting their customers to fill-up deposit slips clearly indicating old and new currency and the denomination of the notes..
The DFS has asked all the MDs &CEOs/CMDs of PSBs and Chairman, IBA to consider this urgently and action taken in this regard be reported by 16.12.2016.
The Ministry also appreciated the role played by the banks post-demonetisation especially when the old currency was accepted and till 24th November, 2016, when exchange of old currency to specified limit was also permitted.
Now that the UK has done what was expected in the last one decade, exiting from the European Union, Britain’s Prime Minister David Cameron has decided to quit from the office in October as the referendum went against his wish to continue in the Union.
In India, the government’s reaction is on expected lines that the economy has enough "firepower" to deal with the situation, and that the Reserve Bank of India (RBI) has been "working" on possible eventualities and the Economic Affairs Secretary Shaktikanta Das was upbeat on fundamentals. But let us face it — grim future ahead and perhaps another prolonged period of uncertainty and recession.
The BSE Sensex lost 1,050 points and investors have lost Rs.4 lakh crore in one day. The rupee touched the 68-mark, down by nealry one rupee in one day, indicating its weakness in a globally turbulent economy. "You know the pound sterling have been depreciating so all currencies have been depreciating," defended Das. With $360 billion in foreign exchange reserves with RBI, he said India’s position "is very sound and solid."
While the knee-jerk reaction is likely to cool in a coule of weeks, for Britain the changes will not be overwhelming as it had always played an outsider role within the European Union. Unlike other members, it had kept its currency, the pound sterling in tact and never joined the Schengen zone of passport-free travel in Europe. Its contribution to EU budget is also relatively less than others.
The pound sterling may see downward movement for sometime and so is India’s rupee but for the reality of entirely breaking away from the European Union may take about two years, if the current David cameroon’s government gives its consent and goes ahead with the referendum’s outcome to exit from EU. So, these two years will be sufficient for India to move closer to the UK both in terms of trade treaty and negotiate more opportunites.
While the immigration was a major cause of worry for Indians in Britain, they can breathe easy now with the exit plan putting a cap on 100,000 immigrants per annum taking concrete shape as no more EU immigrants can enter Britain so easily now. With the immigrants stopped from elsewhere, India may leverage the opportunity for a more favourable immigration policy with the UK.
Finally, the oil prices will fall following Brexit and it will squarely put in more reserves in RBI kitty. "So when oil prices decline, Indian economy benefits," said another Indian Finance Ministry official.
