Analysts believe the measures are forward-looking as they focus mainly on the middle class and lower middle class segments, with the central bank classifying home loans below Rs 20 lakhs (Rs 2 million) in the priority sector. "The RBI's step of reducing both repo and reverse repo rates by 100 basis points is in line with the market expectations.
The repo rate has been unchanged since January, when the RBI increased it by a quarter percentage point.
There's need to address growth, but weak rupee putting pressure on prices.
Reserve Bank Governor Raghuram Rajan is widely expected to hold the key rates citing high inflation at the fourth bi-monthly monetary policy announcement on Tuesday, even though the pro-growth lobby has been wishing for a rate cut.
Go for short-term debt funds and fixed deposits, delay home or auto loans.
According to the global financial services major, inflation may remain sticky, with a possible El Nino effect on the monsoon likely to push up food prices and geopolitical uncertainties seen pumping up global commodity rates.
In a surprise move late Friday, RBI raised its short-term lending and borrowing rates -- the repo rate (the rate at which it lends to banks) and the reverse repo rate (the rate at which banks park their surplus funds with it) -- by 0.25 per cent each to 5 per cent and 3.75 per cent, respectively, to cool off runaway inflation, which has already crossed the central bank's forecast for March at 8.5 per cent, signalling interest rake increase.
DLF, Indiabulls Real Estate, HDIL, YES Bank, Union Bank of India and Maruti Suzuki are down 4-12% on NSE.
It further pointed out that the twin balance sheet problem -- at the end of banks and corporate -- more attractive interest rates for borrowers in the bond market and from non-banking financial institutions are other reasons for slow bank credit growth.
'If the new rate is lower than your current rate, ask your bank to shift you to it.' 'This can be done by paying a fee of Rs 5,000 to Rs 6,000.'
With pricing power of producers unlikely to strengthen and commodities ex-crude oil likely to remain sluggish in the immediate term, the core-WPI inflation may remain sub-zero in the rest of this calendar year.
January inflation may undershoot RBI's 6% target.
The RBI expects change, presumably commencing in the next Budget, but must hold its current view until this actually happens.
Reserve Bank Governor Raghuram Rajan on Tuesday again surprised the markets and raised the key policy rate by 0.25 per cent to 8 per cent in a bid to curb inflation, a move that may translate into higher EMIs and push up the cost of borrowing for corporates.
There are however, enough dovish signals in the governor's statement to indicate a pro-growth policy going forward.
Issuers are currently not comfortable with the bids they have been getting for their bond offerings.
Repo rate may well end 2013 at 8 per cent, where it had begun the year.
The RBI has targeted consumer price inflation at 6 per cent by January and 4 per cent by March 2018.
The gross NPAs of some public sector banks had crossed 4 per cent of their total assets at the end of September.
After hiking the repo rate by 0.50 per cent, RBI Governor Shaktikanta Das on Wednesday said future policy actions by the central bank will be guided by the evolving conditions. Addressing a press conference, the governor said the RBI has changed the policy stance to drop the phrase "remains accommodative", and instead opted for "withdrawal of accommodation" for guiding its future moves. The central bank did not hike the cash reserve ratio contrary to speculation, he said, adding that the liquidity withdrawal will be calibrated and measured.
Most borrowers may not be aware, but quite a few banks already offer external benchmark linked home loans to favoured borrowers, says Harsh Roongta.
In a surprise move, the Reserve Bank on Wednesday left the repo rate unchanged at 7.75 per cent, while the cash reserve ratio too is retained at 4 per cent.
'Policy was more in line with the expectations.'
Further hike will depend on the RBI's assessment
A cut in the CRR will help banks release their funds stuck with the RBI on which they do not get any interest from the regulator.
Banks have issues with their balance sheet profiles, say PSB executives.
The Reserve Bank of India kept interest rates unchanged at 8.0 percent on Tuesday as widely expected, staying focused on containing inflation while adopting a more dovish tone in response to the government's call for help to revive economic growth.
With crude and commodity prices ebbing and the twin deficits under check, the Reserve Bank should have cut the key policy rate to push investments and boost economic growth, India Inc said.
Indian Banks' Association on Thursday said banks cannot lower their lending and deposit rates any further under the current scenario.
The interest rate is the RBI's best bet for keeping the economy close to the 'normality' benchmark.
Ignoring the rate cut demand of India Inc, RBI in its first quarter monetary policy review kept the short-term lending (repo) rate, at which banks borrow from RBI, unchanged at 8 per cent.
Foreign investors have injected close to Rs 33,700 crore in domestic equities in this month so far primarily due to interest rate cut in the US and resilience of the Indian market. This also marks the second highest inflow in a month in this year so far, the last one being in March, when Foreign Portfolio Investors (FPIs) infused Rs 35,100 crore, data with the depositories showed. Going ahead, the trend of FPIs buying is likely to continue in the coming days, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
Finance Minister Pranab Mukherjee on Thursday said the Reserve Bank's move to raise its short term lending and borrowing rates is in the right direction as inflationary pressures are still there in the economy.
200 staffers, consisting of RBI officials and support teams, who are essential to perform critical functions, were isolated at a separate facility in a dedicated quarantined environment near all three RBI data centres.
Over the last week, several banks have cut rates by 25 basis points, clearly not enough to fuel credit demand.
IT and interest rate-sensitive bank, realty, and auto stocks ended with sharp gains.
Net NPAs increased to Rs 36,260 crore in the December quarter from Rs 34,843 crore in September and Rs 33,116 crore in December 2023, observes Tamal Bandyopadhyay.
he reason behind the cut in policy rate seems to be a slowing economy
'Credit expansion is probably the quickest way to get the economy going again.' 'Easy credit is like a shot of nitro in a race car: In timely, small, quick, doses it can give a tremendous boost but carried to extreme it can destroy the engine,' points out S Muralidharan, former managing director, BNP Paribas.
