The Reserve Bank of India on Friday surprised the market with a 25 basis points hike in the repo rate — at which the RBI lends to commercial banks — in its effort to tame the inflation which breached the 6 per cent mark to reach a six month high of 6.1 per cent in August. While the RBI Governor made it clear that repo rate would be the effective policy rate and would be consistent with the inflationary environment, there is no clarity on when the interest rates may start coming down and when home and car buyers can breathe easy.
The tone of the RBI seems more inclined towards fighting inflation than going for growth and since there are expectations that inflation is likely to remain higher on account of a likely hike in fuel prices, it raises some concern for existing and prospective home loan customers, and prospective car owners.
The State Bank of India raised its base rate by 10 basis points thereby raising its lending rate and also raised the interest offering on deposits by 0.25-1 percentage point across various maturities. The bank's action came a day before the central bank was to announce its monetary policy.
Leading housing finance company HDFC too did not deny a hike in interest rates going forward. "We will wait and watch for the next few days on how the rates move and will take a call on the same," said Keki Mistry, vice chairman and CEO, HDFC. He, however, added that he does not expect more repo rate hikes this fiscal and expects a correction in rates in the latter part of this fiscal.
There are others who feel that the tight liquidity environment will continue and lending rates will also firm up. "Liquidity will continue to remain tight and while lending rates are already very high, they will continue to remain high," said Gagan Banga, CEO, Indiabulls Financial Services.
... contd.
Please read our terms of use before posting comments TERMS OF USE: The views, opinions and comments posted are your, and are not endorsed by this website. You shall be solely responsible for the comment posted here. The website reserves the right to delete, reject, or otherwise remove any views, opinions and comments posted or part thereof. You shall ensure that the comment is not inflammatory, abusive, derogatory, defamatory &/or obscene, or contain pornographic matter and/or does not constitute hate mail, or violate privacy of any person (s) or breach confidentiality or otherwise is illegal, immoral or contrary to public policy. Nor should it contain anything infringing copyright &/or intellectual property rights of any person(s).
In tough times, used looks better
Mutual funds: Entry load might make a comeback as fund houses battle downturn
Why not encourage partnerships in investment in human capital?
In boom and gloom some stocks have never ceased to grow