Reserve Bank of India (RBI) Governor YV Reddy on Tuesday unveiled the quarterly review of the credit policy. Ordering banks to keep a tight leash on lending, it hoped to keep inflation within manageable limits. Here’s how the policy affects you.
Will your loans get costlier?
Home loan and other consumer loan rates are unlikely to rise. There is cash aplenty, but it comes with a healthy leash.
What about fixed deposits?
Banks were set to cut interest rates on deposits as they had more cash to lend. With the RBI mopping up some of it, they are unlikely to cut fixed deposit rates. Reddy did this by raising the cash reserve ratio (CRR), the proportion of deposits that banks must keep as cash with the RBI, to 7 per cent from the present 6.5 per cent. This is the fourth such hike since last December.
What’s the effect on the stock market?
The Bombay Stock Exchange saw the CRR hike as a signal to raise rates and the Sensex fell 1 per cent. However, it recovered to close 1.9 per cent up at 15,550.99 as traders realised there was no devil in the policy.