HT Image
HT Image

Market Watch: The interest rate situation

The RBI did urge banks to consider changing rates without any direct cue from itself and the Finance minister has been requesting bank chiefs to lower rates, writes Udayan Mukherjee.
By Market Watch | Udayan Mukherjee | Hindustan Times
UPDATED ON FEB 21, 2008 09:08 PM IST

Interest rates have started coming down. Large public sector banks like SBI and Canara bank have slashed key lending rates twice in the last one month and home and consumer loan rates have been cut across the board. And all this without the RBI signalling any rate easing in it's last monetary policy. While the RBI did urge banks to consider changing rates without any direct cue from itself and the Finance minister has been requesting bank chiefs to lower rates, there could be a couple of other important reasons why banks have started cutting rates proactively.

One, growth is slowing down. In early 2007, the furious pace of credit growth was a problem. Now that the central bank has effectively cooled this tearaway credit growth with higher interest rates, we have come to the other end of the spectrum -- because growth could be lower than desired. The economy is slowing, many sectors are witnessing lower offtake and banks do not want to be in a situation where their bread and butter is affected by their inability to lower interest rates pending fiat from the RBI. Therefore, they are simply doing what is best for their own business, lowering the price of money. Now, why have they not waited for an explicit cue from the central bank this time? Perhaps because of inflation. Even a casual glance at commodity prices will tell you the story. Crude is $100 a barrel, gold is at a high of $950 an ounce and silver at a 27-year- high, base metals have had an incredible run of late and even soft agricultural commodities are stubbornly high.

The US Fed, staring at a recession, does not have the luxury of looking at inflation but the RBI does. Particularly so, with this being a pre- election year and the Finance Ministry is surely not missing any opportunity to remind it of the fact. It is entirely possible then that another couple of monetary policy meetings may pass without the RBI pressing the rate trigger. Banks don't want to keep waiting only to realise halfway down the year that slower growth has started denting credit offtake in a serious manner. That is the way it should be: the RBI does what it thinks is good for the nation, balancing inflation and growth, while banks do what is good for their business of lending.

Generally, interest rate cuts are hailed by equity markets. Yet, interestingly, serial interest rate cuts by the US fed have not sparked off any meaningful rally in global equities and clear signs of rate easing in the domestic market have failed to produce any positive impact either. Rate sensitives are lying particularly quiet : banks have come off on margin worries, real estate stocks have settled 30-50% lower than recent highs and there's no great buying in autos either. Maybe it's the global turmoil clouding sentiment, the reason why the market is ignoring the interest rate cues or maybe it's worried that the growth slowdown is worse than what is built into stock prices today. Once the global clouds clear a bit, hopefully the stock market will spot this ray of sunshine.

Executive Editor, CNBC-TV18

SHARE THIS ARTICLE ON
Close
ISRO also confirmed that the launch rehearsal of PSLV-C51 was completed today.(PTI file photo)
ISRO also confirmed that the launch rehearsal of PSLV-C51 was completed today.(PTI file photo)

ISRO to launch Amazonia-1, 18 co-passenger satellites onboard PSLV-C51 on Feb 28

ANI, Nellore
PUBLISHED ON FEB 25, 2021 05:07 PM IST
Amazonia-1 is the optical earth observation satellite of the National Institute for Space Research (INPE).
Close
A view of the Vistadome coach.(Image via Twitter)
A view of the Vistadome coach.(Image via Twitter)

What are Railways' new Vistadome coaches? All you need to know

By hindustantimes.com | Edited by Mallika Soni
UPDATED ON FEB 25, 2021 05:04 PM IST
Vistadome coaches are European-style coaches equipped with advanced features such as large glass windows, glass roofs, observation lounges and rotatable seats which can rotate up to 180 degrees for passengers.
Close
**EDS: BEST QUALITY AVAILABLE, HANDOUT IMAGE MADE AVAILABLE FROM ITBP** Chamoli: Damaged dam of the Rishi Ganga Power Project, after a glacier broke off in Joshimath in Uttarakhand�s Chamoli district causing a massive flood in the Dhauli Ganga river, Sunday, Feb. 7, 2021. More than 150 labourers working at the Rishi Ganga power project may have been directly affected. (PTI Photo)(PTI02_07_2021_000055B)(PTI)
**EDS: BEST QUALITY AVAILABLE, HANDOUT IMAGE MADE AVAILABLE FROM ITBP** Chamoli: Damaged dam of the Rishi Ganga Power Project, after a glacier broke off in Joshimath in Uttarakhand�s Chamoli district causing a massive flood in the Dhauli Ganga river, Sunday, Feb. 7, 2021. More than 150 labourers working at the Rishi Ganga power project may have been directly affected. (PTI Photo)(PTI02_07_2021_000055B)(PTI)

News updates from HT: Months before Chamoli flood, satellite images showed crack

By hindustantimes.com, Hindustan Times, New Delhi
UPDATED ON FEB 25, 2021 05:01 PM IST
Here are today’s top news, analysis, and opinion. Know all about the latest news and other news updates from Hindustan Times.
Close
Representational image. (PTI)
Representational image. (PTI)

Kashmir: National Conference, PDP welcome ceasefire along LoC

By Mir Ehsan
PUBLISHED ON FEB 25, 2021 04:46 PM IST
A joint statement issued by the armies of both countries said the move followed a discussion between India’s DGMO Lt Gen Paramjit Singh Sangha and his Pakistani counterpart, Maj Gen Nauman Zakaria
Close
A UK judge cleared Nirav Modi's extradition to India on Thursday(Aniruddha Chowdhury/Mint Archives)
A UK judge cleared Nirav Modi's extradition to India on Thursday(Aniruddha Chowdhury/Mint Archives)

'Money laundering charge established': UK judge clears Nirav Modi's extradition

Reported by Neeraj Chauhan | Written by Prashasti Singh, Hindustan Times, New Delhi
UPDATED ON FEB 25, 2021 04:32 PM IST
Prima facie CBI case has been established, a UK court said, adding that Nirav Modi and his brother conspired to defraud the Punjab National Bank (PNB).
Close
Samajwadi Party national president Akhilesh Yadav addresses a press conference.(ANI)
Samajwadi Party national president Akhilesh Yadav addresses a press conference.(ANI)

'When will smart cities be built, rivers cleaned': Akhilesh Yadav asks BJP

ANI
PUBLISHED ON FEB 25, 2021 04:12 PM IST
"BJP should give an answer to the people when will smart cities be built. They took the oath of 'Maa Ganga' to clean the river, but why is it still not clean. They had taken the 'Sankalp' of cleaning all the rivers in the country, but it is not happening," Yadav said.
Close
People wait in queue outside an airport. (HT FILE)
People wait in queue outside an airport. (HT FILE)

Indian expats in UAE seek exemption from self-paid Covid tests on arrival

PTI, Dubai
PUBLISHED ON FEB 25, 2021 04:05 PM IST
India has since February 23 made it mandatory for passengers to produce the negative report of the RT-PCR tests.
Close
Images using Landsat data from the US Geological Survey and topographic data from the Shuttle Radar Topography Mission (SRTM). (Photo Credit: NASA Earth Observatory)
Images using Landsat data from the US Geological Survey and topographic data from the Shuttle Radar Topography Mission (SRTM). (Photo Credit: NASA Earth Observatory)

Months before Chamoli tragedy, satellite images showed crack in mountain ice

PUBLISHED ON FEB 25, 2021 04:00 PM IST
Scientists from Dehradun’s Wadia Institute of Himalayan Geology, who visited the disaster scene, have come up with similar findings, minus the crack being visible months before
Close
In just 9 days, the doubling rate of coronavirus cases in Mumbai has reduced to 294 days..(PTI)
In just 9 days, the doubling rate of coronavirus cases in Mumbai has reduced to 294 days..(PTI)

Covid-19 spike in Mumbai: Here's how the hotspots changed in 9 days

By hindustantimes.com | Written by Deepali Sharma, Hindustan Times, New Delhi
UPDATED ON FEB 25, 2021 03:55 PM IST
Here is the list of Covid hotspots in Mumbai, as of February 23.
Close
In written response to a question in Lok Sabha earlier this month, Union Minister of State for Home G Kishan Reddy said a total of 10,752 cases of ceasefire violations have taken place along India's border with Pakistan in the last three years, in which 72 security personnel and 70 civilians were killed.(AP)
In written response to a question in Lok Sabha earlier this month, Union Minister of State for Home G Kishan Reddy said a total of 10,752 cases of ceasefire violations have taken place along India's border with Pakistan in the last three years, in which 72 security personnel and 70 civilians were killed.(AP)

India, Pakistan agree to follow all ceasefire pacts

PTI, New Delhi
PUBLISHED ON FEB 25, 2021 03:29 PM IST
The decision on ceasefire, effective since Wednesday midnight, was taken at a meeting between the Director Generals of Military Operations (DGMOs) of India and Pakistan.
Close
India for decades has been subject to such proxy cross-border and relentless state-supported terrorist attacks from its neighbourhood.(PTI)
India for decades has been subject to such proxy cross-border and relentless state-supported terrorist attacks from its neighbourhood.(PTI)

Would be compelled to take pre-emptive strike against imminent attack: India

PTI, United Nations
PUBLISHED ON FEB 25, 2021 03:24 PM IST
Naidu told the meeting that exercising self-defence is a primary right of States to be exercised when the situation is imminent.
Close
Tamil Nadu Chief Minister Edappadi K. Palaniswami made the important announcement in the state assembly on Thursday.
Tamil Nadu Chief Minister Edappadi K. Palaniswami made the important announcement in the state assembly on Thursday.

‘All pass’: Tamil Nadu CM says no final exams for classes 9,10, 11

By Divya Chandrababu | Edited by Abhinav Sahay, Chennai
PUBLISHED ON FEB 25, 2021 03:02 PM IST
  • The state board exams are usually held in March, but had been postponed to April this year, due to the pandemic.
Close
At Ficci’s International Conference on Pharmaceutical & Medical Device Sector, Piyush Goyal also said that developed countries are under pressure. REUTERS/Denis Balibouse(REUTERS)
At Ficci’s International Conference on Pharmaceutical & Medical Device Sector, Piyush Goyal also said that developed countries are under pressure. REUTERS/Denis Balibouse(REUTERS)

57 countries back India's demand for IPR waiver on Covid-19 vaccine: Goyal

By hindustantimes.com | Edited by Ayshee Bhaduri, Hindustan Times, New Delhi
PUBLISHED ON FEB 25, 2021 02:49 PM IST
  • In October of last year, India and South Africa proposed a TRIPS waiver for all WTO members to allow greater access to affordable Covid-19 healthcare facilities
Close
Union minister Ravi Shankar Prasad announcing the social media guidelines on Thursday,(ANI Photo)
Union minister Ravi Shankar Prasad announcing the social media guidelines on Thursday,(ANI Photo)

Self-regulating body, monthly compliance reports: Govt's social media guidelines

By hindustantimes.com | Edited by Amit Chaturvedi
UPDATED ON FEB 25, 2021 03:57 PM IST
So far, online news media has not been unregulated, with the information & broadcasting ministry brining it under its ambit last year, but not yet formalising rules for it.
Close
NSA Ajit Doval led the back-channel negotiations with his Pakistani counterpart that led to joint statement by the Indian defence ministry and the Pak military (PTI)
NSA Ajit Doval led the back-channel negotiations with his Pakistani counterpart that led to joint statement by the Indian defence ministry and the Pak military (PTI)

NSA Doval led secret back-channels talks with Pak for months before DGMO pact

By Shishir Gupta, Hindustan Times, New Delhi
UPDATED ON FEB 25, 2021 05:15 PM IST
  • The first sign that India-Pakistan back-channel conversations were on track came this month when Pak army chief Gen Bajwa said it was time to extend a hand of peace in all directions
Close
SHARE
Story Saved
OPEN APP