Tag: central bank

RBI To Launch Digital Rupee Pilot In Call Money Market By October; Check Full List Of Banks Selected

The pilot project for the wholesale CBDC, known as the Digital Rupee-Wholesale (e-W), was launched on November 1, 2022.

The new pilot project will expand the use case of the CBDC to include transactions in the call money market. (Image: Zee Business)

The Reserve Bank of India (RBI) is planning to launch a pilot project for its Central Bank Digital Currency (CBDC) in the call money market by October. The call money market is a short-term interbank lending market where banks lend and borrow money from each other. The CBDC will be used as a token for settlement in this market, as per a rerport in the news agency PTI.

What Is Digital Rupee-Wholesale (e-W)?
The pilot project for the wholesale CBDC, known as the Digital Rupee-Wholesale (e-W), was launched on November 1, 2022. The use case for this pilot was limited to the settlement of secondary market transactions in government securities. The new pilot project will expand the use case of the CBDC to include transactions in the call money market.

RBI Testing Feasibility and Efficiency of CBDC
The RBI is conducting these pilot projects to test the feasibility and efficiency of the CBDC. The central bank is also looking to gather feedback from the participants in these markets to improve the design of the CBDC.

“The RBI will introduce the wholesale CBDC in the call market either this month or next month,” Choudhary said on the sidelines of the G20 Leaders’ Summit here. The introduction of CBDC was announced in the Union Budget 2022-23 by Finance Minister Nirmala Sitharaman and necessary amendments to the relevant section of the RBI Act, 1934, were made with the passage of the Finance Bill 2022.

RBI Selects 9 Banks: Check Full List Here
The RBI picked nine banks — State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, YES Bank, IDFC First Bank and HSBC — for its pilot project for wholesale CBDC.
Besides, the central bank has already rolled out a pilot in the retail version of the CBDC (e-R) on December 1, 2022. The e-R is in the form of a digital token that represents legal tender. It is being issued in the same denominations as the paper currency and coins. It is being distributed through financial intermediaries like banks. Users can transact with e-R through a digital wallet offered by the participating banks.

Source: https://www.india.com/business/rbi-to-launch-digital-rupee-pilot-call-money-market-by-october-full-list-banks-selected-sbi-kotak-mahindra-yes-bank-6308430/

China surprises with modest rate cut amid growing yuan risks

Paramilitary police officers stand guard in front of the headquarters of the People’s Bank of China, the central bank (PBOC), in Beijing, China September 30, 2022. REUTERS/Tingshu Wang/File Photo Acquire Licensing Rights

China cut its one-year benchmark lending rate on Monday as authorities seek to ramp up efforts to stimulate credit demand, but surprised markets by keeping the five-year rate unchanged amid broader concerns about a rapidly weakening currency.

The recovery in the world’s second-largest economy has lost steam due to a worsening property slump, weak consumer spending and tumbling credit growth, adding to the case for authorities to release more policy stimulus.

However, downward pressure on the yuan means Beijing has limited room for deeper monetary easing, analysts say, as a further widening of China’s yield differentials with other major economies could trigger yuan selloffs and capital flight.

The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.45% from 3.55% previously, while the five-year LPR was left at 4.20%.

In a Reuters poll of 35 market watchers, all participants predicted cuts to both rates. The 10 bp cut in the one-year rate was smaller than the 15 bp cut expected by most poll respondents.

“Probably China limited the size and scope of rate cuts because they are concerned about downward pressure on the yuan,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management.

“Chinese authorities care about currency market stability.”

Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China cut both LPRs in June to boost the economy.

The onshore yuan eased in early trade to 7.3078 per dollar, compared with the previous close of 7.2855, while benchmark Shanghai Composite index (.SSEC) and the blue-chip CSI 300 index (.CSI300) also declined.

The yuan has lost nearly 6% against the dollar so far this year to become one of the worst performing Asian currencies.

The reduction in the one-year LPR came after the People’s Bank of China (PBOC) unexpectedly lowered its medium-term policy rate last week.

The medium-term lending facility (MLF) rate serves as a guide to the LPR and is widely read by markets as a precursor to future changes to the lending benchmarks.

China’s central bank has also pledged to keep liquidity reasonably ample and its policy “precise and forceful” to support the economic recovery, amid rising headwinds, according to its second-quarter monetary policy implementation report.

Source: https://www.reuters.com/world/china/china-cuts-1-year-lending-benchmark-keeps-5-year-unchanged-2023-08-21/

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