The Reserve Bank of India (RBI) has cut its key repo rate by 25 basis points, bringing total cuts in 2025 to 125 bps, and signaled the possibility of further easing. To support India’s “goldilocks” economy, the RBI will also boost banking-sector liquidity by up to $16 billion. With inflation below target, these measures aim to stabilize growth amid widening trade deficits and currency pressures.


India Central Bank Cuts Key Rate, Boosts Liquidity to Support 'Goldilocks' Economy

Hong Kong’s interbank liquidity is severely strained as local banks borrowed a record $707 million, the highest amount in over five years. The Hong Kong Monetary Authority, the city’s de facto central bank, stepped in to offer temporary cash through its discount window. This surge in borrowing comes as demand for Hong Kong equities has increased significantly. The rally has put pressure on the financial system. The city's funding costs have spiked to a near six-week high of 4.07%.

Hong Kong interbank liquidity hits 5-year low

On Monday, China's central bank rolled out a new policy tool to manage liquidity and interest rates more effectively within the banking system.

The instrument represents temporary bond repurchase agreements and reverse repos by setting interest rates that are going to influence short-term borrowing costs.

Analysts believe that this would pave the way for a new interest rate corridor setting, with the seven-day reverse repo rate acting as a benchmarking for short-term interest rates.

Indeed, PBOC Governor Pan Gongsheng hinted earlier that the seven-day rate was already, de facto, much like a key policy rate.

The temporary repos and reverse repos would be short-term loans with a one-day maturity. The PBOC will decide whether to conduct repos or reverse repos based on market conditions.

Interest rates for such temporary agreements are set at 20 basis points below and 50 basis points above the seven-day reverse repo rate, translating to 1.6 per cent and 2.3 per cent respectively.

The step, according to analysts, "will give the PBOC the flexibility to fine-tune liquidity conditions by injecting cash through reverse repos or draining excess funds through repos."

Interest rate asymmetry, said market participants, was thought to deter excessive borrowing and also had the potential to turn into a formal policy tool in the future because of its higher rate for borrowing than lending.

Analysts say the PBOC is likely to conduct such temporary operations strategically, especially at month-ends or quarter-ends, when liquidity may need more managing.

While the response of the Chinese bond market was limited, with some pickup in yields, other analysts see that this PBOC move signals—possibly having the effect of—coolly bonding the market by tightening liquidity.

This is amid the recent comments by the PBOC about tapping a large pool of bonds for sale at any time.

(With inputs from Reuters)

On Monday, China's central bank rolled out a new policy tool to manage liquidity and interest rates more effectively within the banking system. The instrument represents temporary bond repurchase agreements and reverse repos by setting interest rates that are going to influence short-term borrowing costs.

On Monday, China's central bank rolled out a new policy tool to manage liquidity and interest rates more effectively within the banking system. The instrument represents temporary bond repurchase agreements and reverse repos by setting interest rates that are going to influence short-term borrowing costs. Analysts believe that this would pave the way for a new interest rate corridor setting, with the seven-day reverse repo rate acting as a benchmarking for short-term interest rates. Indeed, PBOC Governor Pan Gongsheng hinted earlier that the seven-day rate was already, de facto, much like a key policy rate. The temporary repos and reverse repos would be short-term loans with a one-day maturity. The PBOC will decide whether to conduct repos or reverse repos based on market conditions. Interest rates for such temporary agreements are set at 20 basis points below and 50 basis points above the seven-day reverse repo rate, translating to 1.6 per cent and 2.3 per cent respectively. The step, according to analysts, "will give the PBOC the flexibility to fine-tune liquidity conditions by injecting cash through reverse repos or draining excess funds through repos." Interest rate asymmetry, said market participants, was thought to deter excessive borrowing and also had the potential to turn into a formal policy tool in the future because of its higher rate for borrowing than lending. Analysts say the PBOC is likely to conduct such temporary operations strategically, especially at month-ends or quarter-ends, when liquidity may need more managing. While the response of the Chinese bond market was limited, with some pickup in yields, other analysts see that this PBOC move signals—possibly having the effect of—coolly bonding the market by tightening liquidity. This is amid the recent comments by the PBOC about tapping a large pool of bonds for sale at any time. (With inputs from Reuters)

China's central bank introduces new tool to manage liquidity and interest rates

Chinese regulators have reportedly convened with financial institutions to address the challenges faced by state-backed property developer China Vanke.

According to two sources familiar with the matter, regulators urged large banks to boost financing support while urging private debt holders to consider maturity extensions.

These discussions come amidst growing concerns over Vanke's liquidity, prompting regulators to coordinate efforts to support the company.

The sources, speaking on condition of anonymity due to the sensitivity of the issue, emphasised the urgency for progress without specifying the timeline of these requests.

One of the sources revealed, "Banks to ensure (Vanke's) financing, insurers to extend maturities for private debt, (every party) to guarantee the repayments of public bonds."

However, China Vanke declined to comment on the matter. Requests for comments from the National Administration of Financial Regulation and the State Council Information Office, responsible for media inquiries, remained unanswered.

Reports indicate that investors have been offloading shares and bonds of Vanke in recent weeks due to liquidity concerns.

The developer, once perceived as financially stable, has sought debt maturity extensions with some insurers, further worsening market stress.

The tightening repayment requirements by certain national commercial banks have compounded Vanke's financial strain, according to another source familiar with the situation.

The fourth quarter of last year saw a significant decline in new bank loans issued to Vanke, plummeting by more than half compared to the same period in the previous year.

Insurers, including Taikang Insurance, state-owned PICC Property and Casualty, and New China Life Insurance, have reportedly received requests from Vanke for debt extensions.

The apprehension about Vanke's financial health arises amid a series of defaults by prominent developers such as China Evergrande Group and Country Garden since the property sector's descent into a debt crisis in 2021.

Experts caution that Vanke is one of the few developers with investment-grade credit ratings, so any problems with payments might further damage investor trust.

In response to mounting concerns, Vanke reassured stakeholders by disclosing in a filing on Friday that it had deposited the necessary funds to repay $630 million US dollar notes due on Monday.

This move aims to alleviate anxieties surrounding Vanke's immediate financial obligations. However, the broader challenges confronting the company underscore the complexities facing China's property sector as it grapples with mounting debt pressures.

(With inputs from Reuters)

Chinese regulators have reportedly convened with financial institutions to address the challenges faced by state-backed property developer China Vanke. According to two sources familiar with the matter, regulators urged large banks to boost financing support while urging private debt holders to consider maturity extensions.

Chinese regulators have reportedly convened with financial institutions to address the challenges faced by state-backed property developer China Vanke. According to two sources familiar with the matter, regulators urged large banks to boost financing support while urging private debt holders to consider maturity extensions. These discussions come amidst growing concerns over Vanke's liquidity, prompting regulators to coordinate efforts to support the company. The sources, speaking on condition of anonymity due to the sensitivity of the issue, emphasised the urgency for progress without specifying the timeline of these requests. One of the sources revealed, "Banks to ensure (Vanke's) financing, insurers to extend maturities for private debt, (every party) to guarantee the repayments of public bonds." However, China Vanke declined to comment on the matter. Requests for comments from the National Administration of Financial Regulation and the State Council Information Office, responsible for media inquiries, remained unanswered. Reports indicate that investors have been offloading shares and bonds of Vanke in recent weeks due to liquidity concerns. The developer, once perceived as financially stable, has sought debt maturity extensions with some insurers, further worsening market stress. The tightening repayment requirements by certain national commercial banks have compounded Vanke's financial strain, according to another source familiar with the situation. The fourth quarter of last year saw a significant decline in new bank loans issued to Vanke, plummeting by more than half compared to the same period in the previous year. Insurers, including Taikang Insurance, state-owned PICC Property and Casualty, and New China Life Insurance, have reportedly received requests from Vanke for debt extensions. The apprehension about Vanke's financial health arises amid a series of defaults by prominent developers such as China Evergrande Group and Country Garden since the property sector's descent into a debt crisis in 2021. Experts caution that Vanke is one of the few developers with investment-grade credit ratings, so any problems with payments might further damage investor trust. In response to mounting concerns, Vanke reassured stakeholders by disclosing in a filing on Friday that it had deposited the necessary funds to repay $630 million US dollar notes due on Monday. This move aims to alleviate anxieties surrounding Vanke's immediate financial obligations. However, the broader challenges confronting the company underscore the complexities facing China's property sector as it grapples with mounting debt pressures. (With inputs from Reuters)

Regulators rally financial support for China Vanke amid liquidity concerns

The widest liquidity deficit in more than four years is grappling India's banking system. The nation's financial institutions are facing unanticipated difficulties due to record central bank borrowings and a significant outflow of funds for tax payments.

India's banking system faces severe liquidity deficit | Word Business Watch

The Chinese central bank, in a major economic recovery measure, announced that banks will be able to hold lesser reserves than before to keep liquidity sufficient to avert any crisis. The People's Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5 per cent&nbsp;reserve ratio, by 25 basis points from March 27.

ALSO READ |&nbsp;<a href="https://www.wionews.com/world/china-premier-li-qiang-says-achieving-5-growth-target-no-easy-task-571386">China premier Li Qiang says achieving 5% growth target 'no easy task'</a>

The move was widely expected. However, it has come earlier than financial markets had expected.

<h2>China's reserve ratio cuts: Why such a drastic measure?</h2>

The move follows the release of data that shows an uneven recovery in the Chinese economy in the first two months of 2023. The country continues to see&nbsp;a stronger-than-expected credit expansion, stoking crisis fears amid ongoing crisis at financial institutions in the United States and Switzerland.

ALSO WATCH |&nbsp;China: Economy touted to grow at lowest rate, focus still on defence

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"At present, risks in the overseas banking sector are increasing and global liquidity is under pressure, and the external environment is becoming increasingly complex," Wen Bin, chief economist at China Minsheng Bank, was quoted as saying by Reuters.

"In the first two months of this year, China's main economic indicators showed a positive trend, but the overall recovery foundation is not yet solid."

<h2>China's reserve ratio cuts: What does it mean for Chinese banks, economy?</h2>

Analysts cited by Reuters estimate&nbsp;that the move has freed up over 500 billion yuan ($72.6 billion).

The central bank has promised to make its policy "precise and forceful" this year to support the economy, keeping liquidity reasonably ample and lowering funding costs for businesses.

The People's Bank of China said the cut reflected its intention to "make a good combination of macro policies, improve the level of services for the real economy, and keep liquidity reasonably sufficient in the banking system."

China's new premier Li Qiang has pledged to push the overall economy to improve while fending off any major risks, state media reported on Friday.

The reduction follows a 25-bps cut for all banks in December. 
 
(With inputs from agencies) 
 
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The Chinese central bank, in a major economic recovery measure, announced that banks will be able to hold lesser reserves than before to keep liquidity sufficient to avert any crisis.

The Chinese central bank, in a major economic recovery measure, announced that banks will be able to hold lesser reserves than before to keep liquidity sufficient to avert any crisis. The People's Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5 per cent reserve ratio, by 25 basis points from March 27. ALSO READ | China premier Li Qiang says achieving 5% growth target 'no easy task' The move was widely expected. However, it has come earlier than financial markets had expected. China's reserve ratio cuts: Why such a drastic measure? The move follows the release of data that shows an uneven recovery in the Chinese economy in the first two months of 2023. The country continues to see a stronger-than-expected credit expansion, stoking crisis fears amid ongoing crisis at financial institutions in the United States and Switzerland. ALSO WATCH | China: Economy touted to grow at lowest rate, focus still on defence × "At present, risks in the overseas banking sector are increasing and global liquidity is under pressure, and the external environment is becoming increasingly complex," Wen Bin, chief economist at China Minsheng Bank, was quoted as saying by Reuters. "In the first two months of this year, China's main economic indicators showed a positive trend, but the overall recovery foundation is not yet solid." China's reserve ratio cuts: What does it mean for Chinese banks, economy? Analysts cited by Reuters estimate that the move has freed up over 500 billion yuan ($72.6 billion). The central bank has promised to make its policy "precise and forceful" this year to support the economy, keeping liquidity reasonably ample and lowering funding costs for businesses. The People's Bank of China said the cut reflected its intention to "make a good combination of macro policies, improve the level of services for the real economy, and keep liquidity reasonably sufficient in the banking system." China's new premier Li Qiang has pledged to push the overall economy to improve while fending off any major risks, state media reported on Friday. The reduction follows a 25-bps cut for all banks in December. (With inputs from agencies) WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.

Did China sense SVB, Credit Suisse aftershocks? Banks' reserve ratio cut for the first time in 2023

The Swiss central bank on Wednesday said that the embattled Credit Suisse's capital and liquidity levels were adequate but emphasised that it is prepared to make liquidity available to the bank if required.

The announcement was made after shares of the second-biggest bank in Switzerland nosedived to historic lows as its main shareholder declined to invest any money in the institution.

"Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks," said the Swiss National Bank (SNB) and Swiss financial regulator Finma, in a joint statement.

ALSO READ | <a href="https://www.wionews.com/business-economy/credit-suisses-survival-is-in-focus-after-shares-hit-a-new-record-low-572401">Credit Suisse's survival is in focus after shares hit a new record low</a>

Liquidity will be provided by the SNB to Credit Suisse "if necessary", the statement further read, as the turbulent day came to an end during which the market value of the bank fell below $7 billion.

Credit Suisse's share price fell sharply after Saudi National Bank chairman Ammar al-Khudairy said that it would "absolutely not" up its stake.

The market value of Credit Suisse had already received a heavy blow this week amid fears of contagion from the fall of two major banks in the US and its annual report stating "material weaknesses" in internal controls.

The shares of the bank went for a freefall on the Swiss stock exchange, declining more than 30 per cent to hit a record low of 1.55 Swiss francs. By the end of the day's trading, the bank was able to regain some ground as its shares closed at 1.697 Swiss francs, declining by 24.24 per cent.

WATCH | Financial shares fall as Credit Suisse becomes latest crisis for the sector

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Amid the panic in the market, Credit Suisse chairman Axel Lehmann, speaking at the Financial Sector Conference in Saudi Arabia, said no assistance is needed by the government, saying it "isn't a topic".

"We have strong capital ratios, a strong balance sheet. We already took the medicine," said Lehmann, referring to the drastic restructuring plan of the bank revealed in October.

(With inputs from agencies)

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The Swiss central bank on Wednesday said that the embattled Credit Suisse's capital and liquidity levels were adequate but emphasised that it is prepared to make liquidity available to the bank if required.

The Swiss central bank on Wednesday said that the embattled Credit Suisse's capital and liquidity levels were adequate but emphasised that it is prepared to make liquidity available to the bank if required. The announcement was made after shares of the second-biggest bank in Switzerland nosedived to historic lows as its main shareholder declined to invest any money in the institution. "Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks," said the Swiss National Bank (SNB) and Swiss financial regulator Finma, in a joint statement. ALSO READ | Credit Suisse's survival is in focus after shares hit a new record low Liquidity will be provided by the SNB to Credit Suisse "if necessary", the statement further read, as the turbulent day came to an end during which the market value of the bank fell below $7 billion. Credit Suisse's share price fell sharply after Saudi National Bank chairman Ammar al-Khudairy said that it would "absolutely not" up its stake. The market value of Credit Suisse had already received a heavy blow this week amid fears of contagion from the fall of two major banks in the US and its annual report stating "material weaknesses" in internal controls. The shares of the bank went for a freefall on the Swiss stock exchange, declining more than 30 per cent to hit a record low of 1.55 Swiss francs. By the end of the day's trading, the bank was able to regain some ground as its shares closed at 1.697 Swiss francs, declining by 24.24 per cent. WATCH | Financial shares fall as Credit Suisse becomes latest crisis for the sector Amid the panic in the market, Credit Suisse chairman Axel Lehmann, speaking at the Financial Sector Conference in Saudi Arabia, said no assistance is needed by the government, saying it "isn't a topic". "We have strong capital ratios, a strong balance sheet. We already took the medicine," said Lehmann, referring to the drastic restructuring plan of the bank revealed in October. (With inputs from agencies) You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here. WATCH WION LIVE HERE

Will make liquidity available to Credit Suisse if required, says Swiss central bank

Mining baron Anil Agarwal has submitted an expression of interest (EoI) to revive Jet Airways which has been grounded since April 17 due to a severe liquidity crunch, leaving thousands of employees jobless.

Agarwal, Chairman of Vedanta Group, submitted the EoI through his family investment arm Volcan Investments before the close of the bidding process on Saturday afternoon.

The other entities who submitted EoIs are Panama-based Avantulo Group and Russian Fund Treasury RA Creator.

&nbsp;Reports said Volcan Investments' EoI is in no way linked to Vedanta.

Etihad Airways, which was expected to bid for Jet Airways, eventually backed out. And so did the Hinduja Group.<iframe frameborder="0" height="1" width="1"></iframe>

The three EoIs will be reviewed by resolution professional Ashish Chhawchharia to ascertain their eligibility. Late last month, the resolution professional had floated EoIs for selling stake in the airline.

In a statement to the exchanges, the resolution professional said the provisional list of prospective resolution applicants will be issued on August 13.

The estimated date of submitting a resolution plan before the National Company Law Tribunal is September 27.

Mining baron Anil Agarwal has submitted an expression of interest (EoI) to revive Jet Airways which has been grounded since April 17 due to a severe liquidity crunch, leaving thousands of employees jobless.

Mining baron Anil Agarwal has submitted an expression of interest (EoI) to revive Jet Airways which has been grounded since April 17 due to a severe liquidity crunch, leaving thousands of employees jobless. Agarwal, Chairman of Vedanta Group, submitted the EoI through his family investment arm Volcan Investments before the close of the bidding process on Saturday afternoon. The other entities who submitted EoIs are Panama-based Avantulo Group and Russian Fund Treasury RA Creator. Reports said Volcan Investments' EoI is in no way linked to Vedanta. Etihad Airways, which was expected to bid for Jet Airways, eventually backed out. And so did the Hinduja Group. The three EoIs will be reviewed by resolution professional Ashish Chhawchharia to ascertain their eligibility. Late last month, the resolution professional had floated EoIs for selling stake in the airline. In a statement to the exchanges, the resolution professional said the provisional list of prospective resolution applicants will be issued on August 13. The estimated date of submitting a resolution plan before the National Company Law Tribunal is September 27.

Jet Airways receives EoIs from Anil Agarwal’s family trust, two other companies

Indian government&#39;s plan to scrap&nbsp;the Rs 500 and Rs 1,000 bank notes has left millions of citizens in the lurch,&nbsp;with people having to wait&nbsp;for hours in queues at bank branches and ouside ATMs.

The situation worsened because many ATMs went dry on Friday, barely a few hours after the public was allowed to operate them.

That was because banks did not make feed enough cash to refill the machines.

State Bank of India (SBI) said 29,176 of about 50,000 of its ATMs functioned on Friday and the remaining would become operational on Saturday (today). Rituraj Sinha, President, Cash Logistics Association of India, said that shortage of cash with banks and technical glitches were the main reasons for ATMs not functioning optimally.

&quot;The main reason is huge withdrawal and cash availability was not that much. As of now, we have only collected Rs 100 notes from banks. No Rs 500 or Rs 2,000 notes were collected by us (his company SIS),&quot; he said.

The government has reportedly printed 1 billion Rs 2,000 notes and Rs 2 lakh crore (roughly 29.6 billion) worth of cash will come into circulation soon.

Sinha said that his company required Rs 95 crore (a little over $14 million) daily to manage around 2,500 ATMs in the National Capital Region (NCR) whereas they could collect hardly around Rs 10 crore ($1.48 million) on Friday.

The other reasons, he said, were evacuation of old high-denomination currency from ATMs could not be completed and a lot of Rs 500 and Rs 1,000 notes extracted from machines were yet to be deposited with banks and exchanged with Rs 100 and new Rs 500 and Rs 2,000 notes.

The current configuration of ATMs, which has four money cassettes or slots with three for Rs 500 and Rs 1,000 notes and only one for Rs 100 notes, were also creating problems. Some machines did not have cassettes for Rs100 notes at all.

&quot;One cassette can hold 2,500-3,000 currency notes &ndash; that is Rs 2.5 lakh ($3,700) for Rs 100 notes in a single ATM. This is nothing for a city like Delhi. This amount can be dispensed very fast,&quot; said Sinha.

According to him, most banks were too busy handling customers and were unable to attend to the cash logistic firms.

Government placates irate citizens

Meanwhile, the Reserve Bank of India (RBI) and the government issued statements on Friday to assure people that there was sufficient cash available with them and would be supplied to improve the liquidity situation.

&quot;There is enough cash with the RBI. Supply of cash to bank branches and ATMs are being stepped up gradually,&quot; said the government release.

In terms of volume, the share of old Rs 1,000 notes in circulation in the country was 7 per cent and 17.4 per cent for the old Rs 500 notes. Currency of Rs 100 denomination constitutes around 17.5 per cent of the total volumes. The total worth of currency in circulation was Rs 17 lakh crore.

(This report was first published in DNA)

Technical glitches and shortage of cash in ATMs left several people stranded as they struggled to pay for basic goods

Indian government's plan to scrap the Rs 500 and Rs 1,000 bank notes has left millions of citizens in the lurch, with people having to wait for hours in queues at bank branches and ouside ATMs. The situation worsened because many ATMs went dry on Friday, barely a few hours after the public was allowed to operate them. That was because banks did not make feed enough cash to refill the machines. State Bank of India (SBI) said 29,176 of about 50,000 of its ATMs functioned on Friday and the remaining would become operational on Saturday (today). Rituraj Sinha, President, Cash Logistics Association of India, said that shortage of cash with banks and technical glitches were the main reasons for ATMs not functioning optimally. "The main reason is huge withdrawal and cash availability was not that much. As of now, we have only collected Rs 100 notes from banks. No Rs 500 or Rs 2,000 notes were collected by us (his company SIS)," he said. The government has reportedly printed 1 billion Rs 2,000 notes and Rs 2 lakh crore (roughly 29.6 billion) worth of cash will come into circulation soon. Sinha said that his company required Rs 95 crore (a little over $14 million) daily to manage around 2,500 ATMs in the National Capital Region (NCR) whereas they could collect hardly around Rs 10 crore ($1.48 million) on Friday. The other reasons, he said, were evacuation of old high-denomination currency from ATMs could not be completed and a lot of Rs 500 and Rs 1,000 notes extracted from machines were yet to be deposited with banks and exchanged with Rs 100 and new Rs 500 and Rs 2,000 notes. The current configuration of ATMs, which has four money cassettes or slots with three for Rs 500 and Rs 1,000 notes and only one for Rs 100 notes, were also creating problems. Some machines did not have cassettes for Rs100 notes at all. "One cassette can hold 2,500-3,000 currency notes – that is Rs 2.5 lakh ($3,700) for Rs 100 notes in a single ATM. This is nothing for a city like Delhi. This amount can be dispensed very fast," said Sinha. According to him, most banks were too busy handling customers and were unable to attend to the cash logistic firms. Government placates irate citizens Meanwhile, the Reserve Bank of India (RBI) and the government issued statements on Friday to assure people that there was sufficient cash available with them and would be supplied to improve the liquidity situation. "There is enough cash with the RBI. Supply of cash to bank branches and ATMs are being stepped up gradually," said the government release. In terms of volume, the share of old Rs 1,000 notes in circulation in the country was 7 per cent and 17.4 per cent for the old Rs 500 notes. Currency of Rs 100 denomination constitutes around 17.5 per cent of the total volumes. The total worth of currency in circulation was Rs 17 lakh crore. (This report was first published in DNA)

India's rupee demonetisation: ATMs run dry to worsen cash chaos

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