BoJ and Fed maintain status quo

Global: The Bank of Japan (BoJ) surprised markets globally by maintaining a status quo and indicating that it is in no rush to increase stimulus, defying expectations of further expansion in stimulus. However, by lowering its inflation and growth forecasts and pushing out the date by which it expects to reach its inflation target, we believe that BoJ still remains dovish and still on track to increase stimulus this year. Yen strengthened sharply yet again. However, in the medium term, we expect the Yen to depreciate against the USD.

The US Federal Reserve (Fed) maintained status quo in its policy meeting, broadly in line with expectations, and kept the Fed funds target range unchanged at 0.25%-0.50%. A dovish Fed coupled with a 2 year low US Q12016 GDP print (0.5% QoQ) reduces the probability of a June rate hike. More importantly, if the Fed shies away from a rate hike in June, policy action is likely to get pushed to the fag end of the year, as the Presidential election in USA is an event risk, and the Fed would like to see through the event before embarking on further rate hikes.

Domestic: The joint parliamentary committee on Insolvency and Bankruptcy Code submitted its report, paving the way for clearance of the bill by the parliament. The report has been submitted, reportedly, without any dissenting notes with the government accommodating all the amendments moved by the members of opposition parties. The bill adds to measures initiated by the government to deal with the problem of NPAs of banks. The Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act and Debt Recovery Tribunal (DRT) Act have also been amended to make recovery process more efficient and fast.

In an important pro-financial innovation development, the RBI has put out a consultation paper on peer-to-peer (P2P) lending and proposed to bring such platforms under its purview by defining them as NBFCs. It has not proposed any ceiling on the rate of interest that such NBFCs can charge on commissions. The central bank has also proposed to set a minimum capital requirement of Rs 20 mn for such P2P NBFCs. This comes in the wake of the inauguration of the Unified Payment Interface, a public payments infrastructure platform, which could lead to a huge growth in cashless payments through mobile phones..