Reserve Bank of India increases the short-term lending and borrowing rates and the cash reserve ratio (CRR) by 25 basis points each in the annual Credit Policy for the year 2010-11.
About this hikes, economictimes.indiatimes.com, an online news portal about economy and business writes, “The repo and reverse repo rates have been hiked to 5.25 and 3.75 percent respectively, and will raise the cost of fund for lenders. It also hiked the CRR, the portion of money that commercial banks deposit with the central bank, by 25 basis points. The CRR hike draws out Rs 12,500 crores from the system.”
This is the second time the RBI has raised rates 25 BPS. In last month, RBI had hiked key rates by 25 bps and increased Repo and Reverse Repo also.
In an analysis the news portal writes, “The RBI has visibly shifted its policy priority to inflation from growth. It has warned that with growth expected to accelerate next year, capacity constraints are likely to put additional pressure on prices and there is a need to ensure that demand side inflation does not become entrenched. More rate hikes can be expected during the year in order to control inflation expectations.”
About the borrowers and banks situations, the news portal writes, “Borrowers can breathe easy for now as most banks have said they are unlikely to raise interest rates in the immediate future. A quarter percent hike does not warrant an increase in the lending or deposit rates. Also, since it is a lean season, the banks may not require deposits in a big way.
However, banks feel that short-term rates and subprime lending rates for corporates could go up. But the prime lending rate may not be adjusted immediately. Interest rates on deposits will not rise now since there are not many deployment avenues with banks.”
RBI has raised the short-term lending, borrowing rates and the cash reserve ratio by 25 basis points each to control the inflation. Despite it, there are no any suitable steps to control it. It is also a short-term step in the monetary policy.
About this hikes, economictimes.indiatimes.com, an online news portal about economy and business writes, “The repo and reverse repo rates have been hiked to 5.25 and 3.75 percent respectively, and will raise the cost of fund for lenders. It also hiked the CRR, the portion of money that commercial banks deposit with the central bank, by 25 basis points. The CRR hike draws out Rs 12,500 crores from the system.”
This is the second time the RBI has raised rates 25 BPS. In last month, RBI had hiked key rates by 25 bps and increased Repo and Reverse Repo also.
In an analysis the news portal writes, “The RBI has visibly shifted its policy priority to inflation from growth. It has warned that with growth expected to accelerate next year, capacity constraints are likely to put additional pressure on prices and there is a need to ensure that demand side inflation does not become entrenched. More rate hikes can be expected during the year in order to control inflation expectations.”
About the borrowers and banks situations, the news portal writes, “Borrowers can breathe easy for now as most banks have said they are unlikely to raise interest rates in the immediate future. A quarter percent hike does not warrant an increase in the lending or deposit rates. Also, since it is a lean season, the banks may not require deposits in a big way.
However, banks feel that short-term rates and subprime lending rates for corporates could go up. But the prime lending rate may not be adjusted immediately. Interest rates on deposits will not rise now since there are not many deployment avenues with banks.”
RBI has raised the short-term lending, borrowing rates and the cash reserve ratio by 25 basis points each to control the inflation. Despite it, there are no any suitable steps to control it. It is also a short-term step in the monetary policy.
