RBI hikes repo rate; auto, home loans to get costlier
October 25, 2011: The Reserve Bank of India (RBI) on Tuesday hiked repo rate and interests
rates to curb stubbornly high inflation. The 13th hike since March 2010 is likely to make home and auto loans costlier and put further
pressure on economic growth. With food inflation entering double digit figures and headline inflation almost touching the mark,
most analysts had predicted the central bank would increase repurchase rate by 25 basis points to 8.50%.
The RBI has hiked key policy rates 12 times since March 2010 to control
inflationary pressure. However, that hasn't helped in bringing down inflation much.
The central bank hiked repo and reverse rates by 25 basis points each to
8.25% and 7.25% respectively last month. "The baseline inflation path still remains sticky and broadly unchanged
from earlier projections. On the other hand, growth risks have increased
on account of global headwinds and domestic factors," the central bank
noted on Monday in its quarterly report on macroeconomic and monetary developments.
India's economy grew at 7.7 per cent in the June quarter, its weakest
pace in six quarters, but inflation came in at 9.7 per cent in September
despite monetary policy tightening that has made the RBI one of the most
aggressive central banks anywhere over the last year-and-a-half. It said it was "inevitable" that some growth would be sacrificed in a
high inflation environment.
Of 30 analysts polled last week by Reuters, 17 expect the Reserve Bank
of India to increase the key lending rate by 25 basis points on Tuesday,
while 13 expect it to hold the rate steady. The forecasts were among the
most balanced in recent quarters. Source: Agencies
Banks hit by nationwide staff strike
Chennai/New Delhi, August 05, 2011 (IANS): Majority of banking transactions across India were hit on Friday as some
one million staff struck work to protest proposals to divest government
stake in state-run institutions, apart from demanding a host of welfare
schemes. "Nearly one million bank employees in state run, private sector
as well as foreign banks have struck work today (Friday). The nationwide
response for the strike call is good," the convener of the United Forum
of Bank Unions, CH Venkatachalam said in Chennai. "Cheque clearing operations have also been impacted," said the senior
office bearer of the forum, which is an umbrella body representing nine
unions in the banking industry, but admitted that some private banks were functioning."ICICI Bank and HDFC Bank are functioning. We do not have a presence in
them," he added.
"We find that the government's equity capital in public sector banks is
being diluted and reduced and consequently the private capital in our public sector banks is increasing," said Harvinder Singh of the All
India Bank Officers' Confederation. "We demand that public sector banks should not be privatised and
government's equity capital in our banks should not be reduced. Do not avail World Bank loan to capitalise public sector banks."
Other demands include no merger of state-run banks, no outsourcing of
permanent banking jobs to private sector, resumption of recruitment in
right earnest, give jobs to family members on compassionate grounds and
frame guidelines for housing, car and other loans. The union officials said they will meet Aug 10 in Bangalore to decide on
the next course of action.
RBI raises key rate 50 bps, vs forecast of 25 bps
MUMBAI, July 26, 2011 (Reuters): India's central bank stunned investors by
raising interest rates by 50 basis points on Tuesday, showing unexpected
resolve in fighting persistently high inflation despite slowing growth
in Asia's third-largest economy and uncertainty about global demand. The Reserve Bank of India (RBI) increased the repo rate at which it
lends to banks to 8 percent, topping forecasts that it would raise rates
by 25 basis points. It indicated it will continue with its anti-inflationary stance,
catching unawares most economists and market participants who had expected the RBI to signal the end of its tightening spree.
The rate rise was its 11th since March 2010, making the RBI one of the
most aggressive inflation fighters among central banks, and sent bond yields and swap rates sharply higher and stocks lower.
"Quite a surprise. Clearly they are quite worried about inflation and the risk is they don't stop with this rate hike," said Ramya
Suryanarayanan, economist at DBS Bank in Singapore.
"We think further rate hikes are going to slow growth considerably, below the RBI's forecast of 8 percent. Our forecast is 7.5 percent and
such persistent rate hikes point to further downside risk to growth," she said.
The one-year swap rate jumped as much as 24 basis points to 8.22 percent
after the rate decision, while the benchmark five-year swap rate rose 13
basis points to 7.71 percent, further inverting the yield curve in a sign that investors are worried about slowing growth.
India's benchmark 10-year bond yield rose as much as 10 basis points to
8.42 percent after the policy decision, while the benchmark share index
was down to 1.76 percent after starting the day in positive territory.
"Considering the overall growth and inflation scenario, there is a need
to persevere with the anti-inflationary stance," RBI Governor Duvvuri Subbarao wrote in his quarterly review.
"A change in stance will be motivated by signs of a sustainable downturn in inflation," he said.
Wholesale price index inflation was 9.44 percent in June, more than
double the central bank's comfort level, and high prices are expected to
persist in coming months. The central bank, whose forecasts for inflation have proven optimistic
in recent quarters, increased its outlook for wholesale inflation at the
end of the fiscal year in March to 7 percent, from 6 percent earlier. The RBI retained its forecast for economic growth in the current fiscal
year of around 8 percent.
RBI raises repo rate by 25 bps, signals more increases
MUMBAI, June 16,
2011 (Reuters) - The Reserve Bank of India (RBI) raised interest rates
on Thursday for the 10th time in just over a year to combat stubbornly
high inflation and signalled more increases to come even as growth in
Asia's third-largest economy is slowing down. The RBI raised the repo
rate, at which it lends to banks, by 25 basis points to 7.5 percent,
in line with expectations in a Reuters poll. Wholesale inflation
stands at 9 percent, roughly double the central bank's comfort level.
Inflation trumps growth concerns for now. India's rate rise
followed moves to tighten policy this month by China, Brazil and South
Korea. "Domestic inflation risks remain high," the Reserve
Bank of India wrote in its mid-quarter review explaining its decision.
"Against this backdrop, the monetary policy stance remains firmly
anti-inflationary, recognising that, in the current circumstances,
some short-run deceleration in growth may be unavoidable in bringing inflation under control," it said.
Rising rates and slowing growth add to the headaches for an
embattled government buffeted by criticism over persistent inflation
as well as its handling of a spate of corruption scandals and its
inability to push through reforms. Some 15 months of rate increases in
India are taking a toll on companies and investor sentiment.
Car sales growth slowed in May to its weakest pace in two years
and investors have taken fright, pushing India's main stock index down
12 percent this year, making it Asia's worst performer. Economists
expect a further 50 basis points of rate rises in India in 2011, a Reuters poll showed this week
The RBI also raised the reverse repo rate , at which it absorbs
excess liquidity, by 25 basis points to 6.5 percent. Last month, it
said it would keep the rate at 1 percentage point below the repo rate.
Thursday's rate increase followed a sharper-than-expected 50 basis
point rate rise in early May, although data since then has pointed to slowing momentum in India and globally.
India's annual economic growth in January-March slipped to a
lower-than-expected 7.8 percent, the slowest pace in five quarters, as
the rise in credit costs and inflation weighed on consumption and investment.
RBI raises rates by 50 bps, exceeding forecasts
MUMBAI, May 3, 2011 (Reuters) Ė The Reserve Bank of India raised interest rates by a
sharper-than-expected 50 basis points on Tuesday and signalled it would
battle stubbornly high inflation even at the expense of the government's economic growth ambitions.
The rate rise was its ninth since March 2010 and exceeded expectations
for a 25 basis point rise, although the case for stronger action had been building since figures showed March inflation reached nearly 9
percent, above the RBIís perceived comfort zone.
The Reserve Bank of India (RBI) lifted its repo rate, at which it lends to banks, to 7.25 percent.
"Current elevated rates of inflation pose significant risks to future
growth," RBI Governor Duvvuri Subbarao said in the bank's annual
monetary policy statement. "Bringing them down, therefore, even at the cost of some growth in the
short-run, should take precedence," he said. The overnight indexed swap curve flattened with a sharper rise in front
end rates, while the 10-year benchmark bond yield rose 4 basis points to
8.21 percent. The BSE Sensex extended losses to more than 1 percent and the banking
sector was down 2 percent as the central bank toughened its fight to combat inflationary pressures.
The RBI has been among the most aggressive central banks anywhere over
the past year. Central banks in other developing markets have also been
raising rates as their economies emerged from the global financial crisis much faster than industrialised countries.
RBI hikes interest rate as inflation threatens growth
Mumbai, March 17, 2011: India's central bank has raised interest rates again as it continues to
fight rising prices in the country. The Reserve Bank of India raised the cost of borrowing from 6.5% to
6.75%, the eighth rise in the past year. Inflation has been a hot political topic in India, with consumer prices
increasing by 8.3% in February from the same month a year earlier. The central bank has set a target for inflation to be down to 7% by the
end of March. Rising consumer prices have been one of the biggest concerns for the
Indian government, with Prime Minister Manmohan Singh calling inflation
a "serious threat" to the country's economic growth. India has come out of the global recession as one of the fastest-growing
economies in the world. However, rising prices of food and essential commodities have been
threatening to slow down growth.
MEA has no info on black money in foreign banks
NEW DELHI: The ministry of external affairs (MEA) said it has no
information related to black money in foreign banks. The ministry will
have to submit an affidavit by January 20 to the Central Information Commission
(CIC). The ministry's response comes in the light of a Right to Information
(RTI) application filed by Promod Chawla who sought to know from the cabinet secretariat if Swiss and German governments passed any
information about accounts held by Indian nationals in their banks, the
details of such accounts and steps taken by the government to investigate such accounts.
The CIC's order comes barely days after the Supreme Court questioned the
government for keeping under wraps the names of individuals who have stashed away black money in foreign banks. The MEA will be expected to
submit the affidavit within three days. It had denied any records related to accounts held by Indians in Swiss banks and said no such
information has ever been provided by Switzerland. The application was forwarded, under the provisions of the transparency
law, to the MEA. The ministry said no such information is available with
it and that finance ministry is re≠negotiating the Double Taxation Avoidance Agreement ( DTAA with Switzerland.
Chawla then filed an appeal with CIC, saying he was not satisfied with
the reply provided by the MEA. Information commissioner Annapurna Dixit
directed MEA officials to again search the records and provide information to the applicant. During the hearing, MEA reiterated that no
records pertaining to information about black money deposited in foreign banks could be traced by it.
After going through the arguments of both sides, Dixit pointed out that
according to the MEA there is no record of any list of Indians holding
secret accounts in Swiss banks or elsewhere, provided by Swiss government or by any other country to the
ministry. Besides, no record of any such information has been submitted by Indian ambassadors.
Source: Times of India
Top banks hike rates, leads to increased EMI
Bangalore, January 10, 2011: The ICICI Bank, SBI and HDFC Bank announced hikes in lending rates. ICICI increased its
base rate and the Prime Lending Rate (PLR) by 0.5 percent each which was
followed by State Bank of India in just a few hours which announced a hike of
0.4 percent in its base rate and 0.25 percent in PLR. Soon after this, HDFC
followed SBI and increased its base rate by 25 basis points to 7.75 percent.
While the rate hike at ICICI Bank and SBI became effective from January 3, HDFC
Bank hurried and increased the rate from January 1.
SBI also hiked its deposit rates which is the second time the bank chose to hike
it over the past month. It had hiked deposit rates earlier in December as well.
The reference rate for home loans has been increased by ICICI Bank by 0.25
percent, which points towards the expected increase in the EMI amounts as well.
Now that the largest banks in the public and private sector have revised rates,
others are likely to follow suit. Early in December, ICICI was the first amongst
the major banks to hike deposit and lending rates. The week after ICICI's
announcement saw a host of public and private sector banks hiking lending rates.
An increase of 0.25 percent in the reference rate for home loans also refers to
the expected increase in the home loan interest rates that were mentioned in the
announcement made by ICICI Bank. The lender had last hiked lending rates by 0.5
percent on all loans, including home loans. An increase by 0.75 percent has been
attained in the interest rate on home loans in the second rate hike. An increase of approximately 1,030 a month would be observed in loans taken,
which have duration of 20 years. The longer duration loans will face a higher
impact as in their case, interest forms a larger chunk of the EMI. In case of
rate hikes, banks either amplify the monthly installment or increase the number
of installments that need to be paid back.