Some reactions to RBI's monetary policy announced on Monday.
According to HSBC, the RBI will keep the policy rate on hold next week, although it is likely to cut the CRR by 0.25 per cent to address the lingering liquidity tightness.
Five of the six external members had suggested that the central bank should reduce the policy rate.
Reserve Bank's recent policy stance has earned for it praise as well as brickbats.
Considering the tight inflation scenario, RBI had little choice.
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.
Home loan expert Harsh Roongta's take on where the home loan interest rates are headed after the Reserve Bank of India recently cut the cash reserve ratio by 0.25 per cent.
The Reserve Bank is scheduled to come out with second quarter monetary policy review on October 30.
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.
CRR cut does not rule out open market operations.
In view of high inflation and deficient monsoon rainfall, the Reserve Bank may find it difficult to cut the key lending rate to boost the economy as is being demanded by the industry.
There's need to address growth, but weak rupee putting pressure on prices.
Real estate developers said on Tuesday that RBI's decision to cut cash reserve ratio will help improve the liquidity position of various sectors, including realty, but felt that interest rates should be brought down to boost housing demand.
Reserve Bank Governor D Subbarao will, however, not touch the policy rate or the repo, rate at which RBI lends to banks, on October 30 when he unveils the half-yearly monetary policy because headline inflation continues to be elevated at 7-7.5 per cent, the agency said.
The Reserve bank of India has kept the repo rate and reverse repo rates unchanged in its mid-quarter review of monetary policy announced on Thursday.
State Bank of India Chairman Pratip Chaudhuri says though Friday's cash reserve ratio cut will help ease short-term rates, liquidity may continue to be tight and, hence, a further 25-bp (basis point) cut in CRR can be expected.
Banks get bonds boost to raise funds for core sector; up to Rs 50 lakh of home loans in metros and Rs 40 lakh in other cities not to have CRR, SLR requirements
The Monetary policy committe comprising 6 members voted 6-0 in the favour of the rate cut.
Next bi-monthly policy statement on September 30.
This call comes even as both RBI as well as the government are fighting high inflation, driven by a massive jump in vegetable prices since mid-December with unseasonal rain affecting crops.
If RBI slashes its borrowing rate, banks lend at a lower rate. Also, deposit rates go down.
Mukherjee advised European and American policymakers to follow regulatory mechanism on the lines of the Indian banking system.
CRR is the proportion of deposits each bank must keep in the form of cash.
None of the four benchmarks suggested by the RBI is ideal as banks in India create loan assets from their deposits and not borrowing from the regulator or market, says Tamal Bandyopadhyay.
"The government has always believed in stable policies. I am sure that this will continue in the coming budget," ICICI Bank's non-executive chairman, K V Kamath, told reporters on the sidelines of a function organised by the Institute of Chartered Accountants of India in Mumbai.
The Reserve Bank of India is likely to announce a "gradual" exit from its easy money stance and may resort to raising key rates to squeeze out excess liquidity from markets in its forthcoming review meeting, investment banking firm Barclays Capital says.
.jpg)
The Reserve Bank on Monday warned lenders against outsourcing their credit processing activities to third-party entities.
The implementation of MCLR from April 1 has already led to a rate cut of 10 basis points on home loans by the country's largest bank, State Bank of India, and others.
The RBI governor, D Subbarao had met finance minister Pranab Mukherjee on December 18, fuelling speculation that the monetary policy would be tightened.
The Reserve Bank of India has launched an assault on inflation by increasing the cash reserve ratio (CRR) 75 basis points to 5.75 per cent. While sounding upbeat on economic growth, the central bank has kept the door open for an increase in interest rates even before the annual policy statement in April.
The Prime Minister's Economic Advisory Council member G Govinda Rao on Thursday said the Reserve Bank can raise the key rates ahead of its April 20 annual monetary policy to tame the high headline inflation.
'Fear is also a great impetus to push people in the right direction.' 'So, everyone who has touched black money is scared and I'm very happy about it.'
One area where a fiscal stimulus package still needs to be worked is at the state level.
According to Corporation Bank executive director Asit Pal, there would not be any change in prime lending rate as there is sufficient liquidity in the system and credit offtake is also muted at this point of time.
Inflation is likely to peak at 8.7 per cent by end-March and the Reserve Bank is likely to begin tightening its monetary policy from its January policy review itself, a report by Bank of America Merrill Lynch (BofAML) has said.
The central bank may hike CRR by 50 bps; some economists expect a rise in policy rates too.
The Authorities need to realise that a major problem facing this economy, and the world, is deflation, NOT inflation.
Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with the Reserve Bank of India. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.
The Union Budget 2008-09 has focused on farm credit.
The Reserve Bank on Friday eased money supply further by cutting key policy rates and ratios - decisions that would among other things infuse Rs 20,000 crore (Rs 200 billion) into the banking system.
© 2026 Rediff.com - Investor Information - Advertise with us - Disclaimer - Privacy Policy - Sitemap - Feedback - About us - Terms of use - Grievances