18.4.12

RBI cuts interest rates after 3 years

Home and auto loans are expected to become cheaper with the Reserve Bank of India cutting interest rates on Tuesday for the first time in three years by a more-than-expected half a percentage point. The move is aimed at boosting the sagging economy. RBI in its annual policy reduced by 50 bps its repo rate-—the rate at which it lends overnight funds to banks and also announced a slew of consumer-friendly measures such as zero balance savings accounts for all and abolition of pre-payment charges for home loans. The availability of cheaper funds is expected to spur individuals to spend more and business to increase investment. It was expectedly cheered by bankers and industrialists across the board.
MAJOR POLICY MEASURES
50 basis points cut in repo rate signals shift of RBI’s focus to growth
Liquidity support by allowing banks to borrow more from RBI
Economy expected to grow 7.3%, inflation 6.5%, deposits 16% and loans by 17% in 2012-13
THE BAD NEWS
RBI wants govt to hike fuel prices
Warns that future rate cuts not guaranteed
Deposit rates could come down
Inflationary pressures to continue
THE GOOD NEWS
Loans to individuals and businesses to become cheaper
No foreclosure or prepayment charges on home loans
Zero-balance savings accounts with minimum facilities to all bank customers
Unique customer ID may pave way for savings a/c portability
Banks not to provide undue returns for bulk depositors
Fixed rate bank home loans may become a reality

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