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RBI review cheers home loan buyers
Published on Tue, Oct 31, 2006 at 18:25, Updated on Tue, Oct 31, 2006 at 19:38 in Money » Tax section
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Mumbai: The RBI announced on Tuesday its mid-term review of the annual credit policy for 2006-07.
While key short-term rates are kept unchanged, banks will have to pay more to the RBI as the fixed repo rate has been increased by 25 basis points.
Rising crude oil prices and inflation has been bothering the Reserve Bank of India in the last few years. But with crude prices coming down, the Central bank now confirms the economy will grow at 8 per cent during the current fiscal instead of a range of 7.5 to 8 percent estimated earlier.
Good news is also for resident Indians as their remittance limit has been doubled to 50,000 dollars per year.
Mutual funds can now invest $3 billion abroad, compared to $2 billion earlier.
The FIIs can now pick up $3.2 billion of g-secs compared to a limit of $2 billion so far.
But the banking industry received a small rap on the knuckles from the governor mobilise more deposits was his clear message.
“The message for the banking and financial industry is that if you are depending on RBI to provide liquidity, you will have to pay a higher rate as the balance between deposits and lending have to be maintained,” said RBI Governor Y V Reddy.
The good news for home loan buyers is that banks would not increase lending rates at least in the near future.
RBI has also asked the banks to exercise caution on expanding credit growth with bank loans growing by more than 30 per cent.
“We have to be cautious in expanding credit so that it goes to all appropriate segments like manufacturing and other sectors which create more employment opportunities,” said Bank of India CMD M Balachandran.
“As far as consumer and housing is concerned, we have to be careful,” said Indian Overseas Bank CMD T R Narayanswamy.
But with inflation inching up and struggling to stay within the targeted 5-5.5 per cent level, the good news on the crude front could be cancelled out – compounding the problems for the RBI.
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