Credit policy won’t affect your home loan | business | Hindustan Times
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Credit policy won’t affect your home loan

The RBI has hiked the cash reserve ratio (CRR) — the portion of deposits banks have to keep with the RBI — to squeeze money supply and arrest inflation, reports BS Srinivasalu Reddy.

business Updated: Apr 30, 2008 00:15 IST
BS Srinivasalu Reddy

The Reserve Bank of India (RBI) has hiked the cash reserve ratio (CRR) — the portion of deposits banks have to keep with the RBI — to squeeze money supply and arrest inflation, which has touched 7.33 per cent. RBI Governor YV Reddy, in the credit policy announced on Tuesday, raised the CRR by 0.25 per cent to 8.25 per cent, the second hike in 12 days.

The good news for home loan customers is that rates are expected to remain stable for now.

Also, the RBI has relaxed lending norms, laying the ground for banks to give more home loans to the middle-class. So far, loans of up to Rs 20 lakh would have to be secured by the bank setting aside 50 per cent of the amount. Now, banks can give up to Rs 30 lakh without a rise in the security amount.

This may even marginally lower rates on loans up to Rs 30 lakh. “We expect banks to pass on the benefit. It should result in considerable relief to borrowers,” said Reddy.

Bankers are monitoring the situation closely. “Interest rates are a function of evolving market liquidity and cost of funds. We will continue to monitor these before deciding on interest rates,” said Chanda Kochhar, joint managing director and chief financial officer at ICICI Bank.

Though the cost of funds is likely to rise, most public sector banks are likely to hold lending rates for now. “We will assess the level of credit off-take before deciding on rates,” said B Sambamurthy, chairman and managing director of Corporation Bank.

(Inputs from MC Vaijayanthi)