The RBI on Tuesday raised key interest rates for the ninth time since March 2010 by a larger-than-expected 50 basis points as it battles persistently high inflation.
KEY POINTS:
- Repo rate, the short-term lending rate, up 50 basis points at 7.25 percent.
- Reverse repo rate, the short-term borrowing rate, up 50 basis points at 6.25 percent.
- Cash reserve ratio, the level of deposits that commercial banks must keep with the central bank, unchanged at 6.0 percent.
According to the new policy format, the central bank has introduced an additional facility-Marginal Standing Facility (MSF)--for banks to borrow from it. Under it, banks would be permitted to borrow short-term funds from RBI up to one per cent of their deposits at 8.25 per cent, with effect from May 7.
"The reverse repo rate will continue to be operative but it will be pegged at a fixed 100 basis points below the repo rate. Hence, the reverse repo will no longer be an independent variable," Subbarao said.
Views of Industry Officials against The Policy:
T.V. SANDEEP REDDY, MD, GAYATRI PROJECTS LTD
"The immediate impact will be that cost of BOT (build-operate-transfer) projects will go up, as BOT projects are tied up to interest rates. We don't know by what percent interest rates would go up, as it depends on hikes in rates by banks. We will have wait and watch."
BHARAT MODY, CFO, ACKRUTI CITY
"The 50 basis point hike is steep, everyone was expecting 25 basis point hike. This will result in an increase in loan rates to builders, and we will have to wait and watch on whether the banks decide to pass it on or banks decide to absorb (the hike).
This will not immediately impact real estate prices as they are decided by market conditions."
H.M.BHARUKA, MANAGING DIRECTOR, KANSAI NEROLAC
"This increase is going to hurt the industry. It is hurting the housing and auto sector and it is already having an impact on the paints sector. The problem the government is trying to tackle is inflation but raising rates is not the solution."
D.S. KULKARNI, CMD, D S KULKARNI DEVELOPERS
"We, as a real-estate industry, have developed a habit of receiving some shock every day and this one was expected. The rate hike would obviously have certain impact on the sector. As it is, nationalised banks are not supporting the construction industry but housing loan segment would see a major impact."
0 comments:
Post a Comment