Interest on loans may fall further

The central government has reportedly convinced the RBI to further reduce CRR rates, repo and reverse repo rates to help banks reduce interest rates, reports Chetan Chauhan.

Updated on: Dec 30, 2008, 23:38:02 IST

Hindustan Times | By Chetan Chauhan, New Delhi

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Interest rates can further go down by as much as one percentage point in the New Year.

The central government has reportedly convinced the Reserve Bank of India (RBI) to further reduce cash reserve ratio (CRR) rates, repo and reverse repo rates to help banks reduce interest rates. An announcement is expected in the second economic stimulus to be announced this week.

Senior government officials, on condition of anonymity, said differences between Planning Commission deputy chairperson Montek Singh Ahluwalia and RBI governor D Subba Rao on reduction in rates was sorted out at a meeting in the PMO on Monday.

With this, the RBI is expected to reduce the CRR by about 100 basis points to infuse Rs 40,000 crore liquidity in the market. Repo rate and reverse repo rates may be reduced by 50 basis points, a senior government official said.

The second economic stimulus package, which is expected to have some more concessions for the automobile and manufacturing sector, is aimed at making the economy look positive by March 15, the period when the model code of conduct will come into force for general elections in April-May 2008, the official said.

The Election Commission has already ruled out a possibility of early Lok Sabha polls. The new Lok Sabha is to be constituted by May 21.

But, thanks to elections this year, there would be more concessions in offering in the next two months.

A senior government official, not willing to be quoted, said a slew of economic measures including a Rs 400 crore subsidy on prices of cereals and a cut in petroleum prices will be announced to ensure that inflation falls below four per cent by mid-March. At present inflation is at 6.62 percent.

ABOUT THE AUTHOR
Chetan Chauhan
Chetan Chauhan is the National Affairs Editor looking into all aspects of news and features from across India. A Chevening scholar with over three decades of experience in reporting and news management, Chetan has extensively covered all important aspects of the social sector, political economy, environment and climate change nationally and internationally. He did a journalism course at the Reuters Institute of Journalism in Oxford and Digital Media training at Nanyang Technological University in Singapore. He started as a reporter with The Statesman in 1996 and joined the Hindustan Times in 2000 in the metro bureau covering environment, crime and Delhi politics. He covered hot local news, from the Jessica Lal murder case to the rebellion of Delhi Congress MLAs against then Chief Minister Sheila Dikshit, to the replacement of toxic vehicle fuel with cleaner compressed natural gas (CNG) in the national capital. Some of his stories on air pollution became part of the Supreme Court’s landmark MC Mehta versus Government of India case in the National Capital Region (NCR), forcing the government to take corrective measures. As part of the national political bureau since 2004, he covered important central sectors such as environment, education, social justice, labour, rural development, water resources, renewable energy, agriculture, broadcasting and the Planning Commission for more than a decade producing several exclusive and investigative breaking stories. His specialisation is the environment, having covered at least a dozen United Nations global conferences on climate change, biodiversity and wildlife including climate summits in Paris, Copenhagen and Bali. He also covered India’s two five-year plans ---11th and 12th and reported on drafting and execution of right based laws such as Right to Education, Right to Information and rural job guarantee law, MG-NREGA, now being introduced in new format as VG-RAM-G Act. He has in-depth knowledge of social sector issues. He was one of the first to report on tigers vanishing from Sariska and Panna wildlife reserves in 2004 and 2008, respectively, leading to the setting up of the National Tiger Conservation Authority (NTCA) and the introduction of stringent penal provisions for poaching. He has written extensively on the rising human-animal conflict in India and the degradation of India’s biodiversity hotspots because of mining and other activities. Since 2004, Chetan has covered Parliament comprehensively and participated in training on the nuanced coverage of Parliament proceedings. He has travelled extensively across India to cover national and provincial elections since 1998, especially in the Hindi heartland states, considered India’s road to power. He writes a regular column for Hindustan Times, Ecostani, on important national politics, economy, Himalayan ecology and environmental issues. His other responsibilities include providing inputs for edits and edit page articles for the publication, apart from managing news flow from across India.Read More

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