2 hrs ago
SBI Research Urges RBI to Consider Off-Cycle Rate Hike
SBI Research says India’s central bank should consider raising interest rates by 0.5 percentage points soon.
It also recommends widening the range around the main policy rate for a limited time.
The report says markets had already expected the RBI’s recent actions, so they did not make much difference to yields or the exchange rate.
It says the RBI can adjust this range without changing the main rate, currently 5.5%.
The report also says the government should encourage more long-term investment in debt and shares.
It expects economic growth to remain strong and forecasts growth above 7.5% again.
It also recommends that exporters usually bring their overseas earnings back within six months instead of 15 months.
The RBI and government had not provided their views in the article.
SBI Research recommended an off-cycle 50-basis-point rate hike and a wider interest-rate corridor.
The report said recent RBI rate actions were already priced into markets, limiting their impact on yields and the exchange rate.
It said RBI could widen the corridor temporarily without changing the 5.5% repo rate.
SBI Research called for government support to increase patient capital flows into debt and equities, including tax and capital-gains changes.
The report suggested reducing the usual deadline for bringing export proceeds into India from 15 months to six months, with case-by-case extensions.
- Who
- SBI Research made recommendations concerning the Reserve Bank of India and the Indian government.
- What
- The report urged an off-cycle 50-basis-point rate hike, a wider interest-rate corridor, and changes to capital flows and export-proceeds timelines.
- Where
- India.
- When
- The report was cited on Friday; it called for action sooner rather than later and also discussed a larger hike in December.
- Why
- SBI Research said global turbulence was affecting emerging markets and that recent RBI actions had already been priced in by markets.
SBI Research recommendations
Other viewpoints in the article
Immediate monetary action
SBI Research recommendations
SBI Research recommended an off-cycle 50-basis-point hike sooner rather than later and a temporary widening of the interest-rate corridor.
Other viewpoints in the article
The article did not report a response or opposing position from the RBI or another party.
Export proceeds timeline
SBI Research recommendations
SBI Research said the 15-month allowance should not apply universally and proposed six months as the norm, with extensions considered individually.
Other viewpoints in the article
The article did not report a response or opposing position from exporters or the government.
Key facts
- Recommended off-cycle hike
- 50 basis points
- Current repo rate
- 5.5%
- Current corridor width
- 50 basis points
- Proposed usual export-proceeds timeline
- Six months, with case-by-case extensions
- Current export-proceeds timeline cited
- 15 months
- Growth outlook
- SBI Research expected growth to exceed 7.5% again
Sources
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