Quarterly review of monetary and credit policy – Rea(d)dy to move northwards

The RBI guv in his review of monetary and credit policy has given an indication of the turbulent times ahead in terms of interest rate movement. I have been saying that the rates will move upwards and it will continue doing so for some more time. So what are the critical areas dealt with under this review:

Repo rate hiked by 0.25% – This makes money more costlier to the banks who will in turn raise the interest rates on their lending.So home loan borrowers may find their hope of building their dream house a bit more costlier.

Credit to cost more – Provisioning norms on credit card advances and personal loans imply that these loans will now become costlier – so stop rolling over that credit card dues of yours….

Extra provisioning by banks on their exposure to stock markets – this will make lending to stock brokers more expensive and may lead to dampening of the enthusiasm of the broking community.

Lower interest rates to NRI – a clear signal that our fx position is comfortable and we are not willing to welcome fx at very high rates of exchange. NRIs hit because they can no longer arbitrage by borrowing abroad at low rates and parking the funds in India at higher rates of Interest.

Extra provisioning on loans to builders – however with the growing demand for housing the builders might be able to pass on the increased cost to the buyer. But Hike in the home loan borrowing rate together with the higher pass on by builder will result in property rates shooting upward pushed by the higher cost of funds.

Short selling on government securities allowed on T+5 days – a very good move indicating that our markets are beginning to mature. This will provide a big respite to Primary dealers and Bankers who till now could not take any advantages of downward movement in prices of bonds. However the guv has placed restriction whereby in case of illiquid stocks an individual player cannot sell more than 0.25% of the outstanding stock (in liquid it is 0.50%)

A final hurray to the Tatas for aquiring CORUS albiet at a very high cost. It would now be very interesting to see how the Tatas are going to structure the financing aspect of this deal — students keep an eye on this

Advertisements

0 Responses to “”



  1. Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




Admission open for Nov ‘2010 exams

Admissions have already opened for Nov 2010 exams. We offer only 45 seats for a batch and admissions have already started filling up with only 10 seats remaining

Batch for May 2010

Classes scheduled to start from February 2009 for May 2010
February 2007
M T W T F S S
« Dec   Mar »
 1234
567891011
12131415161718
19202122232425
262728  

Archives


%d bloggers like this: