ID :
189112
Thu, 06/16/2011 - 22:40
Auther :
Shortlink :
https://www.oananews.org//node/189112
The shortlink copeid
EMIs set to go up; RBI ups interest rate to fight inflation
Mumbai, Jun 16 (PTI) EMIs for home, auto and personal
loans are set to go up again as the Reserve Bank of India
(RBI)on Thursday hiked key interest rates by 25 basis points,
10th time in the last 15 months, in its effort to rein in high
inflation.
Sacrificing growth, the central banking institution of
India, RBI raised the short-term lending (repo) and borrowing
(reverse repo) rates by 25 basis each to 7.50 and 6.50 per
cent, respectively.
Leading bankers said interest rates would harden further
as cost of funds has become costlier.
"This measure and the prevailing liquidity conditions
could lead to an increase in funding costs for banks and in
lending rates," ICICI CEO and MD Chanda Kochhar said.
In its mid-quarter review of credit policy, RBI noted
that as many as 47 banks have raised their base lending rates
by up to 300 basis points (or 3 percentage points) between
July 2010 and May 2011.
For Rs 30 lakh home loan for 20 year tenure, for
instance, the 3 percentage point hike would translate into
about Rs 4,500 more in EMI.
The central bank also indicated that borrowers' woes may
not end here as it "will need to persist with its anti-
inflationary stance of monetary policy". For this sacrificing
growth in the short term may be "unavoidable".
Current inflation measured by WPI is hovering over 9 per
cent for the month of May this year.
Finance Minister Pranab Mukherjee endorsed the Reserve
Bank of India (RBI) stance stating, "We need to have price
stability for sustaining growth in the medium term."
Expectedly disappointed industry said the RBI move would
hurt growth and have a negative impact on investment
sentiments. The share market too showed disapproval with the
BSE-Sensex shedding 146 points to end below 18,000-mark.
Following the second rate hike by RBI in 45 days,
index of banking shares bankex declined by 66 points on fears
of pressure on margin.
In a bid to protect the margin, banks are expected to
pass on the rate hike sooner than later.
In the last one-and-a-half months, several banks have
revised lending and deposit rates following the annual policy
announcement.
Monetary transmission has been quite strong, with 45
banks raising their base rates by 25-100 basis points after
the May 3 policy.
Following the revision in repo, the interest rate
under the Marginal Standing Facility, an additional borrowing
window, has gone up to 8.5 per cent from the earlier level of
8.25 per cent.
Going forward, the RBI would continue its tight
monetary policy stance in a bid to rein inflation which is
much above the comfort level.
"Based on the current and evolving growth and inflation
scenario, the Reserve Bank will need to persist with its
anti-inflationary stance of monetary policy," RBI said.
"Domestically, inflation persists at uncomfortable
levels. Moreover, the headline numbers understate the
pressures because fuel prices have yet to reflect global crude
prices," it said.
loans are set to go up again as the Reserve Bank of India
(RBI)on Thursday hiked key interest rates by 25 basis points,
10th time in the last 15 months, in its effort to rein in high
inflation.
Sacrificing growth, the central banking institution of
India, RBI raised the short-term lending (repo) and borrowing
(reverse repo) rates by 25 basis each to 7.50 and 6.50 per
cent, respectively.
Leading bankers said interest rates would harden further
as cost of funds has become costlier.
"This measure and the prevailing liquidity conditions
could lead to an increase in funding costs for banks and in
lending rates," ICICI CEO and MD Chanda Kochhar said.
In its mid-quarter review of credit policy, RBI noted
that as many as 47 banks have raised their base lending rates
by up to 300 basis points (or 3 percentage points) between
July 2010 and May 2011.
For Rs 30 lakh home loan for 20 year tenure, for
instance, the 3 percentage point hike would translate into
about Rs 4,500 more in EMI.
The central bank also indicated that borrowers' woes may
not end here as it "will need to persist with its anti-
inflationary stance of monetary policy". For this sacrificing
growth in the short term may be "unavoidable".
Current inflation measured by WPI is hovering over 9 per
cent for the month of May this year.
Finance Minister Pranab Mukherjee endorsed the Reserve
Bank of India (RBI) stance stating, "We need to have price
stability for sustaining growth in the medium term."
Expectedly disappointed industry said the RBI move would
hurt growth and have a negative impact on investment
sentiments. The share market too showed disapproval with the
BSE-Sensex shedding 146 points to end below 18,000-mark.
Following the second rate hike by RBI in 45 days,
index of banking shares bankex declined by 66 points on fears
of pressure on margin.
In a bid to protect the margin, banks are expected to
pass on the rate hike sooner than later.
In the last one-and-a-half months, several banks have
revised lending and deposit rates following the annual policy
announcement.
Monetary transmission has been quite strong, with 45
banks raising their base rates by 25-100 basis points after
the May 3 policy.
Following the revision in repo, the interest rate
under the Marginal Standing Facility, an additional borrowing
window, has gone up to 8.5 per cent from the earlier level of
8.25 per cent.
Going forward, the RBI would continue its tight
monetary policy stance in a bid to rein inflation which is
much above the comfort level.
"Based on the current and evolving growth and inflation
scenario, the Reserve Bank will need to persist with its
anti-inflationary stance of monetary policy," RBI said.
"Domestically, inflation persists at uncomfortable
levels. Moreover, the headline numbers understate the
pressures because fuel prices have yet to reflect global crude
prices," it said.
