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MOSL: FINANCIALS-RBI announces rate hike and other regulatory measures-Mixed bag for banks

Financials: RBI announces rate hike and other regulatory measures; Mixed bag for banks though mostly accommodative in nature

 

• In a rather surprise move, RBI increased policy repo rate by 25bp to 6.25% even as it maintained its neutral stance. The central bank sighted increased risks to inflation and also revised its CPI inflation projections for 2H 2018-19 to 4.7% (4.4% earlier).
• Other key regulatory actions: (i) Increased the carve out limit from SLR by 200bp to 13% (earlier 11%) in order to comply with Liquidity Coverage Ratio (LCR), (ii) Allowed amortization of MTM losses on investment portfolio for 1QFY18 over a period of four quarters, (iii) State government securities should be valued based on the marketable price while the non-traded state government securities to be valued on weighted average spread over the G-sec yield of the equivalent maturity as against the existing practice of valuing with a uniform mark-up of 25 bps, (iv) Extended the relaxation in asset quality classification to all MSMEs having aggregate credit facilities of up to INR250m. All such MSME accounts which turn overdue between 1-Sep'17 to 31-Dec'18 will now follow 180 dpd NPL recognition norms, (v) Revised housing loan limits for PSL eligibility from existing INR2.8m to INR3.5m in metropolitan centers, and from existing INR2m to INR2.5m in other centers.