How do banks respond to RBI's Rate Actions? Part 1 : Banks respond faster to hikes, not cuts

Posted by: Uma Shashikant and Deepa Vasudevan on Wed, Dec 17th, 2014

Monetary policy is effective only when RBI actions are transmitted to bank lending rates. Part 1 of this blog explains how the asymmetric nature of monetary transmission impacts base rates. In Part 2, we discuss how the way banks source funds impedes their ability to reduce base rates despite ample liquidity and strong deposit growth.  Read more

Decoding the Yen Depreciation

Posted by: Deepa Vasudevan on Wed, Nov 19th, 2014

The yen has depreciated by over 35% since the Abe government took over two years ago. The policies of Abenomics aimed to pull Japan out of decades of low growth and deflation. This timeline highlights key milestones in the yen-dollar exchange rate since the implementation of Abenomics strategies.  Read more

The Rate Liftoff: Why Markets Don't Like it

Posted by: Deepa Vasudevan on Sat, Oct 11th, 2014

As the US Fed ends its QE program, a phase of easy money is about to end. Nervousness about the expected US rate tightening has led to widespread volatility and sell offs in equity markets. In this context, the recent Fed stance of holding rates has bought a temporary calm. Read more

The Much Discussed Slowdown in Bank Credit

Posted by: Deepa Vasudevan on Wed, Oct 8th, 2014

The sudden decline in bank credit growth has led to a view that investment will pick up only if interest rates are cut to stimulate the demand for bank loans. This blog dissects the possible reasons for the credit slowdown, ad explores the link between credit and growth. Read more

The Importance of the September 2014 Monetary Policy

Posted by: Deepa Vasudevan on Wed, Oct 1st, 2014

The September 2014 monetary policy clearly signals that RBI will focus on controlling inflation. Its willingness and ability to reduce interest rates will depend on government actions towards supply side reforms, fiscal consolidation and measures to revive the investment cycle. Read more