The RBI has provided rates that banks used to give for one year deposits, all the way back to 1976. Here’s a plot of the “high” rates today (9.25 to 10%). Much of the 90s was a 10 to 12% rate, and I remember that many bonds (IDBI etc.) offered 12%-14% to retail buyers. (We [...]

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RBI has raised interest rates by 0.25%, taking the repo rate to 8.5% and the reverse repo to 7.5%. The repo rate is what banks pay to borrow overnight from the RBI (against the collateral of government securities) and the reverse repo rate is what banks receive from the RBI for depositing money. This is [...]

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The latest RBI macroeconomic survey (Oct 2011) precedes their announcement on monetary policy today. Key parts in their outlook: Growth risks have increased on global headwinds, while inflation continues to be sticky adding to the complexity for monetary policy. Should global downturn accentuate, monetary and fiscal policy space exists, though the current high inflation reduces [...]

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Deepak Mohanty, ED at the RBI talks about inflation and its dynamics. I’d like to discuss part of that article, where he talks about the Inflation trajectory and how it will be determined – and make a case on timing. All emphasis is mine. [Warning: LONG post] Five factors will shape the inflation trajectory. The [...]

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Reserve Money is the base money of our banking system, a level before the banks come in an multiply it with credit. It consists of the money RBI prints (“currency with the public”), the reserves banks keep with the RBI (which is a factor of how much they lend out) and some riff-raff. Typically, a [...]

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Banks are supposed to keep a certain portion of their deposits aside in two compartmentalized areas: a Cash Reserve Ratio (CRR) where banks keep cash (not invested in anything) back with the RBI, and a Statutory Liquidity Ratio (SLR), in which banks are supposed to buy government securities, with a percentage of the money they [...]

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RBI moves rates up in it’s mid quarter review by 25 bps (0.25%) to 8.25%. This is a continuing anti-inflation stance that RBI has, which means raising rates until there are visible results on actual inflation. A medium term look: Inflation which is currently at 9.78% (See Article) is at the highest in a year. [...]

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On Friday, the Reserve Bank of India will release the mid-quarter review of Monetary Policy (12 noon). Will it raise rates again, after 11 consecutive rate raises? We have seen rates rise from the 4.75% lows to 8% on July 26. In the mid quarter review, large policy decisions are not something we should see; [...]

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(From my Yahoo Piece) The Reserve Bank of India increased interest rates by 0.50% on Tuesday, going beyond the expected 0.25% estimate. The Repo rate is now at 8%, which is the interest that banks need to pay in order to borrow from the RBI. The reverse repo rate, or what banks get for parking [...]

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I wrote at Yahoo about "Why Only Interest Rates?" (Will post article tomorrow). I just noticed that the RBI released an audio recording of a post-policy teleconference. A question was asked: Rise in rates will result in appreciation in currency. Will RBI allow that? Will imported inflation reduce? Answer from RBI: we don’t intervene in [...]

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