A slew of factors both favorable as well as not so favourable will determine the apex bank's monetary policy outcome today and of these some of the important one's are listed hereforth:
It is to be noted that for sure rate cut is not in the offing even as the Centre demands so to influence liquidity just ahead of assembly elections in May next year. Also, the rift between the RBI and centre will influence RBI's governor stance to maintain status quo or bring about a hike in key rate.
CARE Ratings have come up with some 8 important parameters that will influence decision in today's meet:
Deposits versus advances ratio: In the current year, loans have outpaced deposits at a faster rate and has stood at a 5-year high of 14.9% on a year-on-year basis.
Liquidity scenario: There is liquidity deficit in the system that amounts to as much as Rs. 81,222 crore during 2nd Nov-29th Nov'18. And to strengthen the position, OMO is being conducted time and again.
RBI Board meeting on November 19, 2019 will also set the tone of RBI MPC outcome-The apex bank in its board meet primarily discussed on 4 agendas including Basel regulatory capital framework, restructuring scheme for stressed MSMEs, banking sector health under Prompt Corrective Action (PCA) framework, and economic Capital Framework (ECF) of RBI. These will have the bearing on outcome today whether it be a surprise rate cut move or rate hike or status quo stance.
NBFC liquidity crisis situation: The systemic crisis that prevail the NBFC sector shall also be weighed upon to render attractiveness for investors and lenders to NBFCs. Banks have been allowed to increase their exposure to a single NBFC until 2018 to 15%.
Rupee's movement: The movement in rupee which has again gained steam on the back of crude oil price surge shall also be monitored. The currency has now again clawed back to levels of below 70 after breaching the psychological level.
Inflation: Due to benign food inflation, inflation for the month of October has narrowed down to levels below RBI's 4% target. Nonetheless, core inflation remained high at above 6% because of high prices in transport and fuel.