RBI cuts repo rate by 25 bps, third time in a row, changes stance to “accommodative”. Relaxes norms for stressed assets, replaces one-day default rule. Waives off charges on NEFT & RTGS. Global growth to slow down in 2019, Forecasts for India through 2021 intact, says World Bank. India's Services PMI hits 12-month low, thanks to electoral disruptions. Renault-Fiat Chrysler merger collapses, French government blamed. Facebook, Amazon, Netflix, and Google lose $137bn in stock market value on back of regulatory concerns. Main progress on US-China trade to be at Trump-Xi summit. US reaches agreement with Mexico to reduce the flow of migrants to the southwestern border, Trump calls off plan to impose tariffs on Mexico.
Moving on to the top Business news of the week.
RBI cuts repo rate by 25 bps, third time in a row, changes stance to “accommodative”. Relaxes norms for stressed assets, replaces one-day default rule. Waives off charges on NEFT & RTGS.
Third In A Row: The Reserve Bank of India (RBI), for the third time in a row, on Thursday cut the repo rate by 25 bps to 5.75%, changing its monetary policy stance to “accommodative” from “neutral”.
As Expected: The move, much along expected lines, came as the growth in the gross domestic product (GDP) declined to a 21-quarter low to 5.8% in Q4FY19.
Every Action Has an Equal and Opposite Reaction: Following the announcement of the rate cut, the 10-year benchmark bond yield fell to 6.89% from 7% before the policy announcement. The Rupee strengthened to 69.28 per dollar from 69.36 earlier.
Read the second bi-monthly Monetary Policy Statement here.
New Framework: The Reserve Bank of India (RBI) on Friday issued a new prudential framework for the resolution of stressed assets, replacing the February 12, 2018 circular that was recently struck down by the Supreme Court.
Because the Devil is in the Details: Some major changes in the new circular are:
Here’s a closer look at the new framework.
Waiving Off: RBI is set to remove charges on bank transfers carried out either through National Electronic Funds Transfer (NEFT) or Real Time Gross Settlement System (RTGS), in an attempt to boost digital transactions in the country.
The Central Bank also announced that it is setting up a panel to review charges imposed by banks on ATM withdrawals.
The announcements were made at the end of the RBI's bi-monthly monetary policy meeting.
Global growth to slow down in 2019, Forecasts for India through 2021 intact, says World Bank. India's Services PMI hits 12-month low, thanks to electoral disruptions.
What?: World Bank recently released its June 2019 Global Economic Prospects (GEP) Report, which maintained that Global growth has continued to soften this year, downgrading real GDP growth to 2.6% for 2019, down 0.3% points vs its prior forecast in January.
Why?: Subdued investment in emerging market and developing economies (EMDEs) cited as principal drivers. Outlook deemed as negative, possibly due to escalating trade tensions. Rising debt to make recovery increasingly challenging.
India: India's growth projections in FY19/20 maintained at 7.5%, unchanged from previous forecasts. Strengthening credit growth and accommodative monetary policy of the RBI to provide support. Outlook for South Asia at-large positive, barring risk of military escalations.