Hailing Reserve Bank's decision to cut key rates, Plan panel on Tuesday said it would boost investments and hoped the measures will have significant effect on long term borrowing rates.
The Reserve Bank of India (RBI) clarification on the final norms for new bank licences has much to mull on for the many entities interested. It has clearly ruled out any benefit to the new entrants in terms of more time to meet the cash reserve ratio/statutory liquidity ratio (CRR/SLR) requirements.
Highlights of the RBI monetary policy.
CRR stand at 5.5 per cent after a 50 basis points cut in January.
While the rupee snapped a four-session downslide, it rupee could not cement intra-day gains as RBI kept short-term lending (repo) and cash reserve ratio unchanged, forex dealers said.
The Reserve Bank has kept the key policy rates unchanged in its Mid-Quarter Monetary Policy Review.
Of the 15 participants, 7 expect CRR cut, only one sees repo rate reduction.
The Reserve Bank of India has kept all key interest rates unchanged in its mid-term credit policy review announced on Monday.
They feel reducing policy rates will help to boost production and revive the economy.
According to bankers, this is because the currency demand during the festival season is expected to remain strong.
RBI on Tuesday slashed short-term lending rate by 0.25 per cent to 7.5 per cent, which the bankers read as not enough for an immediate cut in their lending rates.
Industry has been going through a phase of high interest rates, declining demand and insufficient working capital.
Showing concerns over hardening inflation, the Reserve Bank today left the key interest rate unchanged but reduced cash reserve ratio by 0.25 per cent to inject Rs 17,500 crore (Rs 175 billion) liquidity into the financial system.
The main culprit is the lack of transparency that your lending bank of housing finance institute employs in determining home loan rates.
High inflation continues to be an obstacle in lowering policy rates as of now.
SBI too rules out cut in base rate in short term, to launch concessional schemes.
Chidambaram welcomes CRR cut as a good small step forward.
Some reactions to RBI's monetary policy announced on Monday.
Foreign institutional investors pumped in nearly $167.35 million (Rs 899.83 crore) into the local stock markets on Tuesday, according to the BSE provisional data.
India Inc's reactions to the RBI rate cut.
The new effective repo rate for the third quarter is now fixed at 7.25 per cent while CRR rate has revised to 4 per cent.
In its Third Quarter Review of Monetary Policy 2012-13, the Reserve Bank of India has reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent to 7.75 per cent with immediate effect.
The Reserve Bank of India has been actively doing OMOs or buyback of government bonds to manage liquidity in the system over the last few months.
Short-term lending (Repo) rate is unchanged at 8 per cent.
In its quarterly monetary policy review, RBI had last month retained the CRR at 4.75 per cent and reduced the statutory liquidity ratio -- the amount of deposits banks park in government bonds -- by 1 per cent to 23 per cent, effective August 11.
The Reserve Bank will present the mid-quarter Monetary Policy Review on Tuesday.
Some see CRR cut as tight liquidity continues.
Explaining the rationale behind the regulatory mandate, the deputy governor, who looks after banking supervision, apart from a host of other departments at the central bank, said the CRR is charged on banks because only they can create money.
Five of the six external members had suggested that the central bank should reduce the policy rate.
Prime Minister's Economic Advisory Council Chairman C Rangarajan on Tuesday called RBI's policy action a "wise decision". The liquidity easing measures will have an impact on interest rates, he said.
Real estate companies' borrowing costs have moved up by a third in the last one and a half years, from 11.5-12 per cent to 16 per cent now.
RBI expected to draw comfort from stable core inflation.
This is the fourth consecutive time that the RBI has kept key interest rates unchanged despite clamours from the industry to cut rates to boost economy.
Reserve Bank's recent policy stance has earned for it praise as well as brickbats.
Bank lending has seen a significant fall. RBI needs to bring liquidity into the system immediately.
After all, India is the only one among the BRIC nations (Brazil, Russia, India and China) where lending rates are still ruling at their 2008 peaks.
Within hours of RBI slashing the Cash Reserve Ratio (CRR) by 0.25 per cent, State Bank (SBI) on Tuesday hinted at a likely reduction in lending rates soon.
Bankers on Tuesday ruled out any immediate reduction in lending rates, saying any step in that direction will be determined by the cost of funds.
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