RBI keeps policy rates unchanged

Benchmark indices shrugged off rate cut disappointment to close the week in green.

The Big Picture

• Last week, the RBI’s Monetary Policy Committee (MPC) kept key interest rates unchanged on fears that inflation could surge in coming months as localized lock-downs continue to disrupt supply chains.
• The permissible loan-to-value ratio (LTV) on gold loans for non-agricultural purposes was increased to 90% from 75% earlier. The LTV ratio measures the amount of loan granted for every ₹100 worth of gold kept as collateral. Basically, if you keep ₹1,000 worth of gold as collateral with the bank, it will give you a loan worth ₹900. That makes the LTV 90%. Before this, the permissible LTV ratio was only 75%.
• The move is expected to help households by allowing them to take higher loans against their gold.
• In a major relief to corporate and retail borrowers, RBI also permitted banks to go for a one-time restructuring of loans that are facing stress due to the COVID-19 crisis. Basically, if a borrower is unable to pay the interest on loans because of the crisis, banks might reduce the interest rate it initially charged, in the hopes that the borrowers can pay comfortably.
• This measure was taken to preserve the soundness of the Indian banking sector.
• The India Manufacturing PMI declined to 46.0 in July 2020 from 47.2 in the previous month, below market consensus of 47.8.
• The India Services PMI increased to 34.2 in July 2020 from 33.7 in the previous month, but below market expectations of 38.8.

Investing Insights

Monetary Policy 101

In tandem with the developments of the week, we thought it would only be fitting to highlight one of our previous blog posts that dives into the finer details of the monetary policy and its far reaching implications. As a concept and policy tool, monetary policy has tremendously evolved over decades, and having a brief understanding helps develop a sense of the economy at large.

Monetary policy is one of two broad policy tools (the other being fiscal policy), that are at the governments’ disposal to keep the health of an economy in check while ensuring a sustainable level of economic development. This write-up explores modern monetary policy and its usefulness in the current scenario. Read it here.

Inside smallcase

Customize a smallcase

The smallcase platform has a wide number of smallcases spanning different themes, strategies and models. While all these stocks are curated to meet the specified objectives of the smallcase, you might want not agree with every stock or its particular weightage.

Since smallcases are transparent and you have full control, you can customize a smallcase according to your knowledge to better suit your financial needs. The ‘Customize smallcase’ button lets you edit your smallcase and make it exactly as you want. You can add or subtract stocks and decide their weightages to suit your requirement. However, please be informed that customizing might result in the smallcase deviating from its intended idea and you will not be prompted for any rebalance updates.

Subscribe to our weekly market analysis

3,00,000+ investors read our weekly newsletter for in-depth investment insights, latest market updates, and finance news.

[subscribe_form title=”” color=”blue” size=”compact”][/subscribe_form]