Click to play videoNew Delhi: As expected by the TV-18 poll, the Reserve Bank of India has raised the cash reserve ratio (CRR) rate by 50 basis points or half per cent.
CRR is the proportion of cash commercial banks must put aside as against deposits.
Most analysts were expecting a rate hike though it has left the bank rates unchanged at 7.75 per cent.
The central bank has also left untouched the repo rate which stays at 7.75 per cent.
The reverse repo rate is unchanged at 6 per cent. The RBI has reiterated a GDP forecast of 8.5 per cent, while the inflation target has been kept at 4 to 4.5 per cent.
RBI Governor Y V Reddy clearly mentioned that one of the biggest consideration while framing this credit policy has been the looming threat of inflation.
Chairman, Canara bank, M B N Rao, however, says that the CRR hike will result in a reduction in deposit rates.
“Of course, the very fact that the liquidity is surplus in the system and CRR has to be raised. I think there is a case for the review of the deposit rates downward especially rates up to one year,” said Rao.
VC and MD of Kotak Mahindra, Uday Kotak, was of the opinion that it would mean more significant drop in lending rates.
“From my view, the deposit rates, the one year deposit rates, would be around the 9 per cent mark. Therefore, I think, essentially, this means more significant drop in lending rates and more power for the course. Therefore, I do not see this as a signal for dramatically increasing interest rates. I think it is much more stability and continuity of where we are as of now and no cause for going out and dramatically increasing interest rates,” he said.
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