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HEMANTH LINGAMGUNTA Weighted Average Call Rate:- The Weighted Average Call Rate (WACR) is a key indicator in the overnight money market, reflecting the rate at which short-term funds are borrowed and lent. It plays a crucial role in the monetary policy framework, particularly in India, where it is used as an operating target to align with the central bank's policy repo rate through active liquidity management[1][3][5]. Key Features of WACR: - Overnight Money Market: WACR represents the unsecured segment of the overnight money market, where banks and financial institutions borrow and lend funds for very short durations, typically one day[1][4]. - Monetary Policy Target: The Reserve Bank of India (RBI) uses WACR as an operating target to manage systemic liquidity. The aim is to keep WACR closely aligned with the repo rate, which is the rate at which the RBI lends to commercial banks[1][5]. - Liquidity Indicator: Changes in WACR reflect liquidity conditions in the banking system. A tight liquidity condition often results in a higher WACR, indicating a higher cost of borrowing in the short-term money market[1][3]. - Impact on Economy: WACR influences the pricing of credit products across the economy. When WACR is higher than the repo rate, it suggests tighter monetary conditions, which can affect borrowing costs for businesses and consumers[3][5]. Recent Trends: - As of recent data, the WACR has often exceeded the repo rate, reflecting tight liquidity conditions. This has been observed in several months where the WACR was higher by 20 basis points or more than the repo rate[3]. - The RBI conducts various liquidity management operations, such as variable rate repos, to ensure that WACR remains aligned with the repo rate. This is part of the broader liquidity adjustment framework aimed at supporting inflation targeting and economic stability[5]. In summary, the WACR is a vital tool in the monetary policy arsenal, influencing short-term interest rates and providing insights into the liquidity dynamics of the banking sector. Citations: [1] Weighted average call rate - Optimize IAS https://lnkd.in/gwxGfRQ2 [2] India Call Money Rate: Major Commercial Bank: Weighted Average https://lnkd.in/g8kCUSa6 [3] Effective rates now largely higher than repo rate - The Economic Times https://lnkd.in/gFU-mige [4] Credit in the Economy | IASbaba https://lnkd.in/g9DuPg7s [5] Measures to ensure that the call money rate largely stays at the repo ... https://lnkd.in/gy6Kfs27

The Cash Reserve Ratio (CRR) is a regulatory requirement mandated by the Reserve Bank of India (RBI) under the Reserve Bank of India Act, 1934. It is the proportion of a commercial bank’s net demand and time liabilities (NDTL) that must be held as reserves with the RBI. Banks are required to maintain this reserve in cash, and it is not available for lending or investment purposes. Key Points About CRR: 1. Purpose: • CRR is primarily used to regulate liquidity in the banking system. • It ensures that a portion of the banks’ funds remains secure with the RBI, enhancing monetary stability. 2. Current CRR Rate: • As of December 2024, the CRR rate is 4.5% of NDTL, though this is subject to periodic changes by the RBI depending on monetary policy objectives. 3. Impact on Banks: • A higher CRR reduces the funds available for banks to lend, thus tightening liquidity in the market. • A lower CRR increases available liquidity, potentially boosting credit growth. 4. Exemptions: • CRR is calculated on a bank’s NDTL, which includes demand deposits, savings deposits, and fixed deposits. Certain liabilities like inter-bank deposits and specific types of savings accounts may be exempt from CRR calculation. 5. Frequency of Maintenance: • Banks must maintain CRR on a daily basis, ensuring compliance with the average prescribed levels over a fortnightly reporting period. 6. Penalties: • Non-compliance with CRR requirements can result in penalties from the RBI, including higher interest rates on shortfall amounts. The CRR is a critical tool in the RBI’s monetary policy arsenal, used to manage inflation, control liquidity, and ensure financial system stability. For official updates, refer to the RBI’s website or its monetary policy circulars. Circular references- https://lnkd.in/dH7qmAWZ

RBI Governor Shaktikanta Das said on August 8 that the Monetary Policy Committee (MPC) has decided to keep the benchmark interest rate unchanged at 6.5 percent for ninth time in a row. Here are the highlights from Das' speech: * RBI-led MPC decided by 4:2 to keep repo rate unchanged at 6.5 percent. The MPC decided by 4:2 to stay focused on withdrawal of accommodation, said Das. * Resilient and steady growth in GDP enables monetary policy to focus on inflation, said Das. * Without price stability high growth cannot be sustained.. * Inflation broadly on declining trajectory. * In Q3, substantial advantage of base effect may pull down overall inflation, said Das. * RBI Governor projected retail inflation at 4.5 percent during FY25 assuming normal monsoon. A degree of relief in retail inflation is expected from pickup in southwest monsoon, he said. * RBI keeps growth projection unchanged at 7.2 percent for current financial year. *Banks should mobilise more household financial savings.. * MPC cannot afford to look through persistently high food inflation as it may spillover, cannot and should not become complacent because core inflation has fallen considerably. * Decline in deposits may expose banks to structural liquidity issues; banks should be careful. * Expect current account deficit to remain manageable. * Indian financial system remains resilient, gaining strength from broader macroeconomic stability. * MPC has to be vigilant as country is witnessing persistently high food inflation: RBI Governor. * RBI will continue to be nimble and flexible in liquidity management operations. * RBI Governor Shaktikanta Das expressed concern over rising disbursals of top-up home loans, asked lenders to take remedial actions. * Inflation and growth evolving in balanced manner, though we need to remain vigilant on food prices front. * RBI raises frequency of reporting of banks to Credit Information Companies to a fortnight, as against once a month currently. Shaktikanta Das announced five additional measures: 1. Public repository of digital lending app: RBI has taken many measures for this ecosystem. More so, RBI proposes to create a public repository under a regulated entity, said Das. 2. Accurate credit info is key, Lenders report this to CIC every month. Now, this is to be done on fortnightly basis or at a shorter notice. Borrowers will benefit from faster update of their credit info. 3. RBI raises tax payment limit through UPI from Rs 1 lakh to Rs 5 lakh. 4. Propose delegated payment through UPI. 5. The clearing cycle of cheques is to be reduced from present two working days. Now, cheques will be cleared within few hours of being presented

RBI Monetary Policy 2024 Highlights: Key Announcements and Market Reactions :👇 Repo Rate Stays at 6.5% The Reserve Bank of India (RBI) has maintained the benchmark repo rate at 6.5%, marking the 11th consecutive meeting with no changes. RBI Governor Shaktikanta Das confirmed that the Monetary Policy Committee (MPC) continues to adopt a ‘Neutral’ stance. CRR Reduced by 50 bps to 4% The Cash Reserve Ratio (CRR) has been lowered by 50 basis points to 4%. This move is expected to infuse additional liquidity into the banking system, encouraging more credit availability. This marks the first CRR cut since March 2020, also reduction will occur in two phases, with a 25 basis point cut in each tranche. Significant Boost for the Banking Sector Introduction of Secured Overnight Rupee Rate (SORR) To improve the credibility of interest rate benchmarks and foster growth in the derivatives market, the RBI will introduce a new benchmark—the Secured Overnight Rupee Rate (SORR). This will be based on secured money market transactions such as overnight repo and TREPS. SFBs Allowed to Offer Credit Lines via UPI Small Finance Banks (SFBs) can now extend pre-approved credit lines through UPI, a move designed to promote financial inclusion and benefit customers who are new to credit. Inflation Forecasts Raised for FY25 The RBI has raised its Consumer Price Index (CPI) inflation projection for FY25 to 4.8% (from 4.5%). Revised forecasts are: Q3 FY25: 5.7% (up from 4.8%) Q4 FY25: 4.5% (up from 4.2%) Q1 FY26: 4.6% (up from 4.3%) Q2 FY26: 4% GDP Growth Forecast Lowered The GDP growth projection for FY25 has been reduced to 6.6% (from 7.2%). Revised growth estimates include: Q3 FY25: 6.8% (down from 7.4%) Q4 FY25: 7.2% (down from 7.4%) Q1 FY26: 6.9% (down from 7.3%) Q2 FY26: 7.3% Market Reaction : Indian equity markets, including Sensex and Nifty 50, responded positively to the CRR cut, reflecting investor optimism.

Topline Market Review (Nov 22, 2024): Rally was observed at the exchange led by banking sector as index gained to make an intraday high of 2,295 points (up by 2.36%) largely on rumor that Pakistan bankers association has tabled removal of MDR on savings deposits for conventional banks. Some profit taking was observed later during the day as investor`s factored in the fact that aforementioned rumor has not been confirmed by the authorities. KSE 100 Index settled at 97,798 (up by 0.48%). Record participation was observed today by investors as traded value for the day stood at Rs.45.4bn (highest after May 31, 2017). Top contribution to the index came from banking sector as MEBL, BAHL, MCB, HBL, BAFL and HMB cumulatively contributed 1,139 points to the index. Traded value wise HBL (Rs.2.8bn), PSO (Rs.2.3bn), MARI (Rs.2.1bn), FFC (Rs.1.93bn) and OGDC (1.74bn) dominated the activity. HCAR closed near its lower circuit (down by 9.97%), pressure in the automobile assembler can be attributed to its 2QMY25 result today, where in the company posted EPS of Rs1.80 (down by 62% YoY and up by 27% QoQ) - result came lower than industry expectations. Topline Weekly Review (Nov 22, 2024): KSE 100 Index gained by 3.2% on WoW basis, this gain can be attributed to conclusion of talks with IMF at the end of last week, where there was no indication of mini budget which boosted investor sentiment. Apart from buying by the mutual funds also provided further stimulus to the market. Major developments during the outgoing week were: 1) Current Account recording surplus for third consecutive month as it came in at US$349mn for the month of Oct-2024 and 2) fixed bond PIB auction during the week, where government raised Rs368bn against target of Rs300bn and cut-off yields declined in the range of by 9-19bps. Investor participation increased during the week as average daily traded volume and value for the week stood at 991mn shares (up by 13% WoW) and Rs.34.4bn (up by 5.2% WoW) respectively. Regards Topline Sales Desk

Understanding CRR, SLR, and Repo Rate: The Basics Simplified If you’ve ever wondered how the banking system works or why financial terms like CRR, SLR, and Repo Rate keep popping up in news about the economy, this post is for you. Let’s break these terms down into simple language. 🏦 What is CRR (Cash Reserve Ratio)? CRR is the portion of money banks must keep with the Reserve Bank of India (RBI). Imagine you deposit ₹100 in your bank. The bank cannot use the full ₹100. A percentage (say ₹4, if CRR is 4%) must be kept as cash with RBI. Why does it matter? Ensures banks don’t run out of money to repay depositors. Helps the RBI control inflation and liquidity in the economy. 💰 What is SLR (Statutory Liquidity Ratio)? SLR is another percentage of deposits banks must keep, but this time, in the form of government securities, gold, or cash. Think of it as a safety net for banks. Why does it matter? Ensures banks have a backup in case of emergencies. Helps the government borrow money when needed by selling securities. 💸 What is the Repo Rate? The Repo Rate is the interest rate at which banks borrow money from the RBI. If banks run out of cash, they go to the RBI, pledge some securities, and get funds at this rate. Why does it matter? If the Repo Rate is high, borrowing becomes expensive, reducing the money flow in the economy (used to control inflation). If the Repo Rate is low, borrowing becomes cheaper, encouraging spending and investment. 🧩 How Do These Work Together? Think of the RBI as the guardian of the economy: CRR and SLR are tools to ensure banks remain stable and trustworthy. The Repo Rate helps manage money supply and keeps inflation under control. 📊 Real-Life Impact For You (as a consumer): Changes in Repo Rate affect loan interest rates. When it goes up, your EMIs can increase. For Businesses: Lower rates encourage borrowing and expansion; higher rates slow things down. For the Economy: These tools balance growth and stability 👇 Let’s Discuss! Have questions or insights about these terms? Drop them in the comments! Or share this post to help someone else understand the basics of banking.

RBI Reports 97.76% Return Of Rs 2,000 Currency Notes The Reserve Bank of India on Thursday said 97.76% of the Rs 2,000 denomination banknotes have returned to the banking system, and only Rs 7,961 crore worth of the withdrawn notes are still with the public. On May 19, 2023, the RBI announced the withdrawal of Rs 2,000 denomination banknotes from circulation. The total value of Rs 2,000 banknotes in circulation, which was Rs 3.56 lakh crore at the close of business on May 19, 2023, when the withdrawal of the high value banknotes was announced, has declined to Rs 7,961 crore at the close of business on April 30, 2024, the Reserve Bank said in a statement. "Thus, 97.76% of the Rs 2,000 banknotes in circulation as on May 19, 2023, has since been returned People can deposit and/or exchange Rs 2,000 banknotes at 19 RBI offices across the country. People can also send Rs 2,000 bank notes through India Post from any post office to any of the RBI Issue Offices for credit to their bank accounts in India. Public and private entities holding such notes were initially asked to either exchange or deposit them in bank accounts by Sept. 30, 2023. The deadlin Latest Markets Pledge To Vote Business Research Reports Economy & Finance Videos RBI Reports 97.76% Return Of Rs 2,000 Currency Notes On May 19, 2023, the RBI announced the withdrawal of Rs 2000 denomination banknotes from circulation. PTI 02 May 2024, 07:21 PM IST Share ADVERTISEMENT The Reserve Bank of India on Thursday said 97.76% of the Rs 2,000 denomination banknotes have returned to the

- Repo Rate Definition: - The repo rate, short for repurchase rate, is the interest rate at which the central bank (like the Reserve Bank of India) lends money to commercial banks against securities like government bonds. - It is a tool used by central banks to regulate liquidity, inflation, and economic growth. - Key Components: 1. Lending and Borrowing Parties: - In a repo transaction, there are two main parties: the lender (central bank) and the borrower (commercial bank). 2. Collateral: - The borrower pledges collateral (typically government securities) to the lender to secure the loan. This ensures that the transaction is secure for the lender. 3. Interest Rate: - The repo rate itself is the interest rate charged by the central bank on the funds lent to commercial banks. It determines the cost of borrowing for banks. 4. Tenor: - Repo transactions have a specified tenor or duration. They can be overnight (one day), term (more than one day), or open-ended (without a specified maturity date). 5. Role in Monetary Policy: - The repo rate is a crucial tool of monetary policy. By changing the repo rate, central banks can influence borrowing costs for banks and, indirectly, for businesses and consumers. - Lowering the repo rate encourages borrowing and investment, stimulating economic activity. - Raising the repo rate can help curb inflation by making borrowing more expensive, thereby reducing spending and demand. 6. Transmission Mechanism: - Changes in the repo rate are transmitted through the financial system, affecting other interest rates such as lending rates, bond yields, and deposit rates. 7. Market Operations: - Central banks conduct repo transactions as part of their open market operations (OMO) to manage liquidity in the banking system. - Reverse repo operations, where the central bank borrows funds from commercial banks, are another tool related to the repo rate. 8. Impact on Financial Markets: - Movements in the repo rate can influence stock markets, currency exchange rates, and overall investor sentiment depending on their implications for economic growth and inflation expectations. Understanding these components helps policymakers, economists, and financial market participants assess the implications of changes in the repo rate on the broader economy and financial system.

Running Yield - Weekly Report dated 3rd June 2024 Report Synopsis: Banking system liquidity tightness: Set to ease over the course of the year  §  Banking system liquidity has been tight over the last nine months or so. Banking credit offtake growth rate has been higher than deposit growth rate, and government expenditure has been slow. Of late, due to election protocol, government expenditure has been slow even in the new financial year.  §  However, over the course of the year, we expect liquidity to improve. As and when the new government is formed, the full union budget will be presented and expenditure will pick up. We expect buoyant FPI inflows over the course of the year, at least in bonds, potentially in equity as well. The USD inflows will be converted to INR, adding to liquidity in the banking system. The ‘bonus’ dividend transfer from the RBI to the government would lead to a lower borrowing from the market, taking less money from the banking system.  §  The RBI has been intervening with VRR auctions from time to time. The government has done their part, by reducing the scheduled borrowing through Treasury Bills. There have been multiple G-Sec buyback auctions, in view of the government having surplus cash. However, the response has been muted and acceptance has been low, as Banks have been asking for lower yield (higher price).  § Going forward, we expect the RBI to change its stance from ‘withdrawal of accommodation’ to neutral. As and when that happens, RBI’s approach to liquidity should change as well. Along with pick up of government expenditure, post new government formation, and FPI inflows, banking system liquidity tightness is expected to improve. Listen to the podcast on this report: Spotify - https://spoti.fi/3SAmuX8 Apple Podcast - https://apple.co/3Rpel6S Google Podcast - https://bit.ly/3SJQVKx Anchor - https://bit.ly/3RnGSd6 Amazon Music: https://amzn.to/3DsPon9 #EconomicTrends #EconomicGrowth  #Banking #GDPGrowth #BankingSystemLiquidity  #RBI #inflation #runningyield #podcast #marketview Joydeep Sen Kunal Singh Kochar Rodney Correa Sunil Jani Vaibhav Singhal