India hikes interest rates by 50 basis points to fight inflation

MUMBAI - India's central bank on Wednesday hiked rates for the second time in two months, as Asia's third-largest economy reels from galloping inflation in the wake of the Ukraine war.

The Reserve Bank of India raised its key repo rate by 50 basis points to 4.90 percent, a month after kicking off an aggressive monetary tightening cycle with a surprise 0.4 percentage point rise.

Agence France-Presse

India central bank unveils $24-billion windfall for government

NEW DELHI -- India's central bank has announced a $24-billion windfall for the cash-strapped government, giving a much-needed boost to Prime Minister Narendra Modi as he seeks to kickstart growth in Asia's third-biggest economy.

But the payout will likely stoke fresh concerns about the Reserve Bank of India's independence following a standoff that has seen top officials quit amid accusations of government interference.

Modi has come under increasing pressure to fire the economy, which has slowed in each of the past 3 quarters -- losing its status as the world's fastest growing -- with unemployment hitting its highest level since the 1970s.

The auto sector has been particularly badly hit, with car sales plunging in July for the ninth month running, while weak consumer spending has hit demand for everything from biscuits to hair oil.

The RBI said it had approved a transfer of 1.76 trillion rupees ($24.4 billion) to government coffers, including a dividend of 1.23 trillion rupees and 526 billion rupees in excess reserves following the adoption of a new methodology for assessing market risk.

Monday's announcement came days after Finance Minister Nirmala Sitharaman announced a slew of measures to help the economy, including bringing forward a $10-billion liquidity lifeline for credit-shy banks and rolling back an extra levy on equity sales that had spooked foreign investors.

Sujan Hajra, economist at Anand Rathi Securities, said that the latest announcement is a "positive move" for the economy and for public finances.

"As the RBI said, despite this fund transfer India will still have one of the best capitalizations of the central banks globally and it does not reflect poorly on either the government or the central bank," Hajra told AFP.

Ashutosh Datar, an independent economist from Mumbai, agreed, telling AFP: "The amount looks huge but it is not and there is no raid on RBI reserves."

However, the bank's independence has already been called into question after it cut interest rates four times this year to a nine-year low, reportedly under government pressure.

Governor Urjit Patel resigned in December following a public spat with Modi's administration -- which was re-elected earlier this year -- accusing it of trying to undermine it.

He was followed in June by deputy governor Viral Acharaya citing the same reasons, although the bank insisted this was unrelated and he had left for personal reasons.

source: news.abs-cbn.com

Indian postmen to turn bankers with Modi's new payments bank

NEW DELHI - Indian Prime Minister Narendra Modi launched a payments bank on Saturday to turn postmen into bankers so they can offer financial services to the poor in rural areas and boost digital transactions.

Modi has since 2014 sought to end what he has called "financial untouchability" by giving millions of people access to banking services in India, which the World Bank estimates has 190 million people without a bank account, second only to China.

The India Post Payments Bank will start operations with 650 branches. Accounts will be able to hold a maximum of 100,000 rupees ($1,408) in deposits and will offer limited services.

The government said it planned to link its 155,000 post offices to the new payments bank network by Dec. 31 to offer basic bank account services, money transfers and bill payments.

"Using this initiative, we will take the bank to villages and to the poor," Modi said at the launch event in New Delhi, which was also attended by dozens of postal service employees who sat dressed in their khaki-colored uniforms.

More than 300,000 postmen will use smartphones and other digital devices to offer doorstep banking services in remote areas of the country.

While Modi addressed a gathering in Delhi, his ministers promoted the launch across the country.

The campaign to bring the masses into the financial system could help bolster economic growth and improve Modi's popularity among the poor ahead of next year's national election.

The bank is the latest government initiative to boost digital transactions and discourage cash dealings that it says enables tax evasion.

Modi has promoted digital payments since his decision in November 2016 to withdraw 500 and 1,000 rupee notes from circulation. Electronic transactions have soared since then, although the move briefly hurt economic growth.

Indians in May clocked transactions worth $52 billion using their 964 million credit and debit cards, nearly double the amount recorded in November 2016.

Monthly mobile-wallet payments have risen nearly fivefold to $2 billion during the period, data from the Reserve Bank of India showed.

source: news.abs-cbn.com