RBI squeezes Banks, but home loans safe for now | business | Hindustan Times
Today in New Delhi, India
May 29, 2017-Monday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

RBI squeezes Banks, but home loans safe for now

Home loan borrowers and prospective car buyers can heave a sigh of relief. A quarter percentage point hike in signal rates by the Reserve Bank of India (RBI) on Tuesday is not big enough for banks to immediately jack up lending rates.

business Updated: Apr 21, 2010 02:21 IST
HT Correspondent

Home loan borrowers and prospective car buyers can heave a sigh of relief.

A quarter percentage point hike in signal rates by the Reserve Bank of India (RBI) on Tuesday is not big enough for banks to immediately jack up lending rates.

But the honeymoon of soft rates is over, and experts said consumer loans could get costlier later this year.

The RBI increased its signal rates in its annual monetary policy statement for 2010, because inflation has been growing. By raising the cash reserve ratio (CRR) to six per cent, it signalled its intention to squeeze some cash out of commercial banks into its own treasury.

It also raised the rates at which it lends and borrows from banks — all by 25 basis points.

“The RBI has set the stage for more rate hikes,” said Abheek Barua, chief economist at HDFC Bank. “If that happens there may be visible impact on the lending rates.”

RBI governor D. Subbarao too did not rule out further hikes.

“I will not rule out a mid-cycle action because we do not know how the situation will turn. But we will think many times before we do it,” Subbarao said.

Keki Mistry, CEO of home loan lender HDFC, said there was “enough liquidity in the system” implying that banks would not run short of cash following the rate hike and thereby consider raising home loan rates, to feel a demand pinch for home loans that might encourage banks to raise rates.

Whether there are further hikes or not will depend on the inflation figures in coming months. And that in turn depends upon the monsoon and global oil prices.