Loans made costlier, but RBI frees deposit rates | business | Hindustan Times
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Loans made costlier, but RBI frees deposit rates

business Updated: Oct 26, 2011 01:55 IST
HT Correspondent

There is good news if you are a depositor and bad news if you are a borrower — and a saving grace if you are sitting on a home loan with some cash to spare.

Loans are getting costlier, deposits will fetch more and prepayment of home loans will soon stop attracting penalties.

The Reserve Bank of India on Tuesday again hiked its policy rate — at which it lends to banks — the 13th time in 19 months, to squeeze money supply in order to contain demand to rein in inflation, which is hovering at 9.72% despite long-drawn measures. This set the stage for banks to hike rates on home, auto and consumer loans yet again.

But the central bank also freed up savings bank deposits from rate control — which means that you can get more than the 4% currently being offered on savings deposits.

The rate will now depend on what competing banks offer. Yes Bank promptly responded by hiking its savings deposit rate to 6%.

Also, after its half-yearly policy review, the RBI announced that borrowers who wanted to pay back home loans ahead of maturity might do so without a pre-payment penalty.

"We will pursue with the banks to do this (ending prepayment penalties) as soon as possible," RBI governor Duvvuri Subbarao told reporters.

Home and auto loan consumers may yet get a breather. "There is no immediate pressure to hike lending rate and we will take a decision later," said Shikha Sharma, chief executive officer, Axis Bank.

RBI also lowered GDP growth projection for the current fiscal to 7.6% from the earlier 8%.