The Reserve Bank of India on Thursday hiked the cash reserve ratio (CRR), the amount of depositors' money that banks need to park with it, by half a per cent to tighten money supply, as part of concerted efforts with the government to ease inflation.The hike, which would take CRR to 8 per cent, will come into effect in two tranches of 0.25 per cent on April 26 and May 10.
The RBI has announced its credit policy last week and auto financiers believe that consumers should 'wait and watch' before the interest rates on auto loans settle down.
Highlights of RBI's third quarter review of monetary policy.
RBI Governor Shaktikanta Das on Thursday said financial inclusion will continue to be a "policy priority" for the central bank to make the post-pandemic recovery more equitable and sustainable. The Reserve Bank of India will very soon be coming out with the first financial inclusion index, which will assess progress in terms of access, usage and quality, Das said, while speaking at the Economic Times Financial Inclusion Summit. It is the responsibility of all stakeholders to ensure that the financial ecosystem (including the digital medium) is inclusive and capable of effectively addressing risks like mis-selling, cybersecurity, data privacy and promoting trust in the financial system through appropriate financial education and awareness, he added.
The Reserve Bank of India, which has already raised the cash reserve ratio (CRR) thrice since December last year, is contemplating another hike, though only on incremental deposits this time.
Home loans and consumer goods loans are likely to remain high as the Reserve Bank of India kept its key policy rates unchanged during its Monetary Policy review on Tuesday.
Since the burden of 'reserve' tax has fallen primarily on SMEs as they depend on bank finance, a further hike in its Cash Reserve Ratio will definitely hit the SMEs and small savers.
Country's leading housing finance company HDFC chairman Deepak Parekh said on Friday that he expects interest rates to soften by 0.25-0.50 per cent if there is no hike in the cash reserve ratio.
The interest rate is the RBI's best bet for keeping the economy close to the 'normality' benchmark.
Real interest rates yet to touch highs witnessed in mid-90s.
The broader Nifty also slipped from record by falling 33.15 points at 10,081.50 as investors booked profits.
This is the first official data on inflation after RBI announced its mid-term monetary review in which it raised cash reserve ratio by 50 basis points to suck out excess liquidity. While retaining its forecast for inflation at five per cent this fiscal, RBI lowered its objective for the medium-term to three per cent against 4-4.5 per cent as announced in the last quarterly review in July.
The Reserve Bank of India (RBI) may opt for a 25 per cent cut in the repo rate, to prop sagging demand in the interest rate-sensitive durables sector in the mid-term review of its 2007-08 monetary policy on October 30.The likely reduction in the repo rate would take place despite concerns about inflation, which suggest that interest rates can be left unchanged, banking sources said.
Global rating agency S&P forecast on Tuesday a slowdown in Indian economy to 8.6 per cent this fiscal due to high interest rates and appreciating rupee but expected no change in key rates and cash reserve ratio in RBI's credit policy on October 30. But the strong domestic demand would ensure that India maintains high growth. The moderation from last year's 9.4 per cent to 8.6 per cent this year therefore reflected a soft landing, S&P said in its mid-year review.
The MSS limit has been raised from Rs 1,50,000 crore (Rs 1,500 billion) in the current financial year. This is the fourth time the government has raised the limit.
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The Reserve Bank of India Deputy Governor Rakesh Mohan on Thursday said the cash tightness in the banking system was temporary
Finance Minister P Chidambaram says stock market fall not a cause for worry.
Liquidity is expected to remain comfortable this week, albeit the rate at which it is available may inch up rather than remaining below 1 per cent.
Aggressive buying towards the end saw the index zoom to a high of 15,569 - up 344 points from the day's low. The Sensex finally ended with a smart gain of 290 points at 15,551.
Since the start of the year, the RBI has had to contend with rising inflation and increased liquidity in the financial system causing it to raise CRR and repo rate to reign in the excess money.
The global brokerage firm believes that CRR cut is likely to help cut lending rates and revive growth sentiments.
A massive liquidity outflow of over Rs 40,000 crore (Rs 400 billion) in the coming weeks is expected to pull back the overnight call rates from the near sub-zero levels to the central bank-desired 6-7.75 per cent range.
For the last two years, the home loan borrower has been facing the brunt of high interest rates
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The Sensex opened with a negative gap of 260 points to 12,812.
Ahead of its annual monetary policy scheduled next month, the RBI in a sudden move hiked the repo rate and Cash Reserve Ratio** to 7.75 per cent and 6.5 per cent, respectively to suck out about Rs 19,500 crore (Rs 195 billion0 from the system.
The Reserve Bank of India said it would attempt to bring down inflation from 11-12 per cent to 7 per cent by March, 2009.
The banking industry could witness another round of prime lending rate hikes beginning next week, a top Indian Banks' Association official said on Wednesday.
However, fresh buying at lower levels helped the index recover all its losses by mid noon trades. A fresh round of buying in late trades saw the index surge to a high of 14,249 - up 518 points from the days low. The Sensex finally settled with a gain of 113 points at 14,220. The NSE Nifty ended with a gain of 60 points at 4,251.
The Reserve bank of India has just increased its repo rate and CRR and there are chances that banks may soon increase the interest rates on home loans.
A spiralling inflation is likely to force the Reserve Bank of India to up the Cash Reserve Ratio by 0.75 per cent in FY 09, along with a 1 per cent hike in repo and reverse repo rates, global financial services major, StanChart said.
Concerned over surging inflation, Reserve Bank of India hiked the short-term repo rate on Wednesday by 0.25 per cent to 7.50 per cent while keeping reverse repo, bank rate and cash reserve ratio unchanged.
When interest rates rise, so does the EMI of your home loan. There are two ways in which you can deploy surplus funds to reduce the EMI. For maximum benefit, you can combine the two options.
The overnight call rate is seen in a range of 8-10 per cent till mid-February, as banks would take some time to soften credit growth.
The tightness in the liquidity situation escalated on Friday, with the interbank call money rates jumping the highest in six years to close at 19 per cent. The rates had touched 25 per cent intra-day.
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