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  Home Financial and Banking News 2011 (India)
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   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. 









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