There was a strong case for rate cut
Will Reserve Bank of India helps those who help themselves?
The answer appears to be straightforward No. Last week HDFC – India’s largest mortgager, decided to cut lending rates citing ‘improved operational efficiency and good quality portfolio’ as the main reason; by the way, just for your knowledge, this was the first rate cut since 2003!
Well, good for HDFC and good for its consumers and may be good for other too, if they are able to replicate HDFC’s efficiency. But overall bank lending paints a dismal picture. Non-food credit by scheduled commercial banks expanded by 22.2%, y-o-y, as on January 4, 2008 as compared with 28.4% at end-March 2007 and 31.9% a year ago. The deceleration in credit growth coupled with the acceleration in deposit growth led to a decline in the incremental credit-deposit ratio (y-o-y) of SCBs to 63.3% as on January 4, 2008 from 93.7% a year ago.
“By keeping all the key rates unchanged today, the RBI has moved from a tightening of interest rates to a neutral stance,” told Mr. Sameer Kulkarni, Fund Manager – Fixed Income Fidelity Fund to B&E. A rate cut in the US has widened the difference between interest rates in the US and India, which will trigger increased capital flows, besides leading to a faster appreciation of rupee, but RBI seems more concerned about inflation and wanted to leave no room for complacency, hence it played safe.
Big companies will continue to meet their funding requirements though domestic and overseas capital markets, the pain will actually be felt by SMEs both in manufacturing and export sectors.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
Will Reserve Bank of India helps those who help themselves?
The answer appears to be straightforward No. Last week HDFC – India’s largest mortgager, decided to cut lending rates citing ‘improved operational efficiency and good quality portfolio’ as the main reason; by the way, just for your knowledge, this was the first rate cut since 2003!Well, good for HDFC and good for its consumers and may be good for other too, if they are able to replicate HDFC’s efficiency. But overall bank lending paints a dismal picture. Non-food credit by scheduled commercial banks expanded by 22.2%, y-o-y, as on January 4, 2008 as compared with 28.4% at end-March 2007 and 31.9% a year ago. The deceleration in credit growth coupled with the acceleration in deposit growth led to a decline in the incremental credit-deposit ratio (y-o-y) of SCBs to 63.3% as on January 4, 2008 from 93.7% a year ago.
“By keeping all the key rates unchanged today, the RBI has moved from a tightening of interest rates to a neutral stance,” told Mr. Sameer Kulkarni, Fund Manager – Fixed Income Fidelity Fund to B&E. A rate cut in the US has widened the difference between interest rates in the US and India, which will trigger increased capital flows, besides leading to a faster appreciation of rupee, but RBI seems more concerned about inflation and wanted to leave no room for complacency, hence it played safe.
Big companies will continue to meet their funding requirements though domestic and overseas capital markets, the pain will actually be felt by SMEs both in manufacturing and export sectors.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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