RBI has today announced the hike of 25 bps in the Repo and Reverse Repo Rate which now currently stands at 6.25% and 5.25% respectively. However, the Cash Reserve Ratio has been left unchanged at 6% ensuring that economic growth is not thwarted due to lack of funds.
The credit policy announced by RBI, is intended to actively manage liquidity to ensure that it remains broadly in balance with neither a surplus diluting monetary transmissions nor a deficit choking off fund inflows.
The above move will not lead the banks to hike commercial interest rates immediately.
Moreover, the loan to book value has been capped at 80% for banks in order to secure assets of the lender in case of default. RBI has also increased the risk weight for residential housing loans of Rs 75-lakh and above, irrespective of the LTV ratio, to 125 per cent from exiting 100 basis points.
Besides, RBI has also increased the bank provisioning for teaser loans to 2% from 0.4% earlier. The RBI's direction to the banks on provisioning would make home loan slightly expensive.
This move might witness subdued consumer demand for loans in the forthcoming times. However, the policy will have a positive impact on bonds.
This is the 6th time in the current year that RBI has revised the credit policy as a measure to bring down rising annual inflation which currently stands at 8.6%.
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