Skip to main content

LOANS TO BE CHEAPER


REPO, REVERSE REPO SLASHED

Signalling a further cut in home, auto and other loan rates, the RBI on 4th March, 2009 slashed the rates at which it lends and borrows short-term funds from banks by half a per cent. RBI cut Repo (overnight lending rate) by 50 basis points to 5 per cent and Reverse Repo (overnight borrowing rate) identically to 3.5 per cent with immediate effect. 
The decision, RBI said, "will further encourage banks to provide credit for productive purposes at viable interest rates. Bankers said rates would come down in the days to come. The decisions will reduce the borrowing costs of banks, who have been citing high cost of funds as a key handicap for not passing on the full benefit to customers.
The Reserve Bank has cited global developments for this decission. The central bank, in a detailed note explaining the new measures, has said since the third quarter review on January 27, the global financial and economic conditions have deteriorated further.
"The fourth quarter real GDP numbers of several advanced economies have turned out to be worse than expected. The uncertainty on global recovery has increased," the RBI statement said. It said the US real GDP contracted sharply at an annualised rate of 6.2 per cent in the fourth quarter of 2008 while the unemployment rate there moved up to 7.6 per cent. The real GDP in the euro area also declined by 1.5 per cent in the fourth quarter of 2008. Reflecting deteriorating global demand, Japanese exports fell by 45.7 per cent in January and the Japanese economy, the world's second largest, contracted sharply by 3.3 per cent in the fourth quarter of 2008. RBI pointed out that by way of response, the governments all over the world continue to unveil expansionary fiscal policies.
21 times - A New Record 
Creating a record of sorts in terms of altering its key rates or ratios during a single fiscal, Reserve Bank today effected the 21st such decision of this financial year.This includes 13 monetary actions of an increase in key rates or ratios through April-September -- which sucked up more than Rs 1,00,000 crore worth liquidity from the banking system in order to control inflation. This was followed by eight instances of rate or ratio cuts that injected close to Rs 4,00,000 crore into the system to stimulate consumer spending to keep the economy ticking. This is the fifth cut in repo (overnight lending rate) since October 2008, while the reverse repo rate has now been slashed three times since early December. Besides, the RBI has slashed its cash reserve ratio -- the mandatory deposits banks need to keep with it -- four times since the third quarter of the current fiscal.
Prior to embarking upon a rate-cut spree in September 2008 to stimulate the economy fighting a global downturn, the RBI had been hiking its key rates and ratios to tackle the surging inflation. The first monetary action of RBI in the current fiscal came into effect on April 14, when RBI raised the CRR by 25 basis points to 6.25 per cent. With as many as 10 hikes through August 2008, the CRR rose to a high of nine per cent, after which the RBI started slashing this ratio, bringing it to the current level of 5 per cent.
Besides, the reverse repo rate stood at 6 per cent at the beginning of this fiscal, which has now come down to 3.5 per cent through three cuts. The repo rate started the fiscal at 7.75 per cent and was hiked to 9 per cent with three hikes through October 2008. Thereafter, RBI has announced five cuts in it, bringing it to current level of 5 per cent.



Comments

Popular posts from this blog

MUNSHI PREMCHAND STORIES IN COMIC FORMAT

Stories by modern Hindi and Urdu literary legend, Munshi Premchand are now available in comic format published by Amar Chitra Katha. The comic books in Hindi detailing two stories by the late literary phenomenon, is part of the publisher's contemporary classics section, which began in 2012 with stories by author Ruskin Bond. "We are launching the comics at the World Book Fair and it is our tribute to Premchand. The idea is to make his stories familiar with children," Reena Puri, Editor, Amar Chitra Katha told PTI. The stories "Buddhi Kaki" (The old Aunt) and "Do Bail" (Two Oxen) have been scripted and illustrated by Pratima Singh and Surendra Murthy. The English version of the comics translated by Nandini Nair is also set for launch within a few weeks, says Reena. The books are priced at Rs 50 each. "Buddhi Kaki" first published in 1921 is the story of an old childless widow who craves for love after she bequeaths her entir…

WORLD's FIRST UNDERWORLD TENNIS COURT IN DUBAI

Dubai, which boasts of the world's highest tennis court, may also become home to the first underwater tennis centre where spectators can watch games from below or above the sea life through a massive glass dome. Krzysztof Kotala, a Polish architect who owns a studio in Warsaw, is currently seeking investment from local players to make the ambitious project a reality. Interestingly, the proposed location for the project (arguably one of the world's lowest tennis courts) is just next door to the highest tennis court atop the Burj al Arab skyscraper in Dubai. "There is not an investor but I would like to get interest (from them) as I think it is a good idea," Kotala, 30, was quoted as saying by a local magazine. When asked why he chose Dubai for his project, Kotala said the Gulf city had a rich tradition of tennis. "This will be something original. This should be somewhere where there is the tradition of tennis. Dubai is perfect for this idea," he said. The in…

LAGADAPATI, VUNDAVALLI EXPELLED FROM CONGRESS

Cracking the whip, Congress today expelled six Lok Sabha MPs from Seemandhra who had given a notice of no-confidence motion against Government opposing bifurcation of Andhra Pradesh. Faced with dissent in Andhra Pradesh, the party intended to send a strong message to those opposing creation of separate state with this decision but a dozen odd party MPs still maintained that they will vote against the Telangana bill when it comes to Parliament. "Congress president Sonia Gandhi has approved the decision of the disciplinary committee of the AICC to expel the six MPs from Andhra Pradesh with immediate effect," said AICC general secretary Janardan Dwivedi in a press release. The MPs expelled by Congress president Sonia Gandhi are Sabbam Hari, G V Harsha Kumar, V Arun Kumar, L Rajagopal, R Sambasiva Rao and A Sai Pratap. All these MPs had signed the notice of non-confidence motion along with some MPs from other parties like TDP and the party has sought to give a …