According to the newly effective interest rate, FD having tenor of 7 to 45 days will earn 4 per cent instead of 4.5 per cent earlier.

FD rates for tenure of one-year and above have been reduced by 10 bps. The one year FD will now earn 5.9 per cent instead of 6 per cent earlier.

This is the second time bank has reduced rates in one month. In February the PSU bank reduced FD rates by 10-50 bps. The back-to-back rate cuts have come despite RBI maintaining status quo in its monetary policy announcement in the month of February.

In should be noted that FD rates applicable for tenure of 46 days to 179 days, 180 days to 210 days and 211 days to less than one year have been kept unchanged.

The PSU bank has als0 reduced the MCLR rates by up to 15 bps.

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The Union Minister stated that 1 Lakh MT of Onions was the target but since the Onion growing season had ended across the world and international prices were high, Orders were placed strategically in small lots and over a period of time to ensure international prices don’t increase drastically. The Union Government had planned the imports based on the initial demand and has already contracted almost 40,000 MT of Onions which will arrive in India before the end of January. So far, 12,000 MT of Onions have arrived in the country and is ready for distribution among the State Government.

Shri Paswan further added that the main concern is to protect the interest of consumers and for ensuring that, the domestic supply is being augmented with imports so that prices are moderated and overall availability is increased. He said that there has to be a coordinated effort between the Central and State Governments and the consumers to ensure this objective is achieved. Therefore, the Union Minister exhorted all State Governments to honour the demands they had placed initially and may even go beyond their initial demand and distribute the imported Onions in their respective States to ensure that prices are moderated.

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“The jump in the price of what’s viewed by investors as a safer asset in times of political and economic uncertainty came after Iran’s missile attack on US-led forces in Iraq early on Wednesday,” said a Reuters report.

On the MCX, gold contracts for February were trading higher by Rs 562, or 1.38 percent, at Rs 41,225 per 10 gram at 0920 hours. It hit a record high of 42,278 per 10 gm.

Experts are of the view that both Gold and Silver are likely to trade higher and dips should be used to buy, and investors should avoid going short at higher levels.

On Gold, 40,400 level is likely to act as major support while Silver could find support near 47,700 levels in the domestic market.

Buy on dips strategy still working in both the precious metals as tensions escalate in the Middle East.
Gold prices sustain above $1600 could extend rally towards $1630-1640 levels and Silver prices sustain above $18.50 could extend rally towards $19-19.20 levels in the international market.

Trend strongly bullish and recommend to buy on a dip in both the precious metals and avoid short sell.
The Middle East crisis flared up again after Iran attacked military facilities in Iraq hosting American troops in its first retaliation to the killing of a top general by US forces last week. It wasn’t immediately clear whether there were casualties or major damage from the attacks. The US confirmed the attack with President Donald tweeting: “Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good! We have the most powerful and well equipped military anywhere in the world, by far! I will be making a statement tomorrow morning.”

Apart from geopolitical tensions in the Middle East, gold is likely to get further direction from US monthly non-farm payroll data, due on Friday. The US Federal Reserve will also take cues from payroll data to decide the policy path in 2020, he added.

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The central bank announced Thursday it will buy longer-dated debt and simultaneously sell shorter maturity notes in a concept similar to Operation Twist used by the U.S. Fed in 2011-12. The move is aimed at bringing down the soaring cost of borrowing, or term premia — the difference between the benchmark 10-year yields and the central bank’s policy rate.

The new tool is part of the broader measures put in place by the RBI to bolster rate transmission after banks failed to fully pass on its 135 basis points of policy easing since February. The central bank has separately prodded banks to peg part of their loan books to external benchmarks such as treasury bills and the repurchase rate, and pumped in billions of dollars to keep liquidity in surplus in the banking system.

The policy easing cycle this year saw Das and his rate-setting panel deliver a rare 35 basis-point cut in August. The governor had then termed the move as neither “excessive” nor “inadequate.”

“Governor Das and his team are evidently open to experimenting with unconventional policy instruments,” said Saugata Bhattacharya, chief economist at Axis Bank Ltd. This is the “optimal approach” given the uncertain response from banks despite an environment of huge surplus liquidity, and yet stubbornly high credit costs.

Earlier this month, the six-member Monetary Policy Committee surprised markets by deciding to hold the repo rate steady at 5.15%, citing high inflation. The MPC, headed by Das, preferred to wait and watch for the previous rate cuts to trickle through before easing further.

“More steps are likely to smoothen the liquidity and credit premia aspects of the lending rates to hasten the pass-through of an easy monetary policy,” Radhika Rao and Eugene Leow, analysts at DBS Bank Ltd. in Singapore, wrote in a note.

Forex Swaps

Das has tried unconventional methods to manage liquidity before.

When the markets faced a cash shortfall in March, the RBI chose to do forex swaps instead of its traditional bond purchases.

It announced two swaps of $5 billion each in March and April, both of which were fully subscribed. By doing this, the RBI managed to tackle two issues: inject rupee liquidity and bring down elevated forward premia rates and reduce hedging costs.

Unlike his predecessor Urjit Patel, Das is known for widespread consultations with market participants.

Some in the market had suggested ‘Operation Twist’ as a way to pass on more of the central bank’s five rate cuts to businesses and individual borrowers. With investment and consumption weak in India, Das hasn’t dithered about measures to spur credit and lift economic growth from a six-year low.

“Unconventional problems require unconventional measures,” said Sandeep Bagla, associate director at Trust Capital Services India. “Generally, central bankers have limited influence on the longer end of the curve, which is determined more by the inflation and fiscal dynamics. But in the short run, the RBI intervention can help to reduce the steepness.”

Not all are convinced about the effectiveness of the move. A central bank experiments with such maneuvers only after extinguishing conventional monetary policy options, according to a note by ICICI Securities Primary Dealership. There could be adverse unintended consequences if the RBI adopts these measures, it said.

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The Reserve Bank of India (RBI) on Thursday went against majority expectations and kept repo rate unchanged at 5.15 per cent in its fifth bi-monthly policy review of the year.

A large number of economists exuded confidence that RBI’s six-member Monetary Policy Committee (MPC) would lower the key interest rate once again as growth in the second quarter reached a six-year low of 4.5 per cent.

However, the central bank already cut repo rate — at which banks lend from the RBI — five times since January without any improvement in growth.

All six members of the RBI’s MPC voted against the cut but maintained an accommodative stance, allowing it to act whenever necessary.

In what seems to be another setback, the central bank also lowered its GDP growth forecast for the entire year to 5 per cent from 6.1 per cent.

In a statement released after the announcement, RBI said, “GDP growth for Q2 turned out to be significantly lower than projected. Various high-frequency indicators suggest that domestic and external demand conditions have remained weak. Based on the early results, the business expectations index of the Reserve Bank’s industrial outlook survey indicates a marginal pickup in business sentiments in Q4.”

RBI also added that overall sentiments are muted in several key sectors including manufacturing and construction. It expressed concern over contraction in the output of eight core industries as well.

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