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Interest Rates Drop, SLR lowered and more

4 comments Written on November 2nd, 2008 by
Categories: Uncategorized
RBI has announced a 1% drop in Cash Reserve Ratio (% of deposits that get deposited in RBI) and a 1% drop in the Statutory Liquidity Ratio (% of deposits in certain govt. bonds). And, a 0.5% drop in the repo rate - the rate which banks can get money from RBI.

Unfortunately none of the banks want to lend. Rather, they're happy to pay higher for deposits - still advertising the 10-10.5% deposit rates. And they will not cut lending rates - they're eating up the spread.

The RBI has tried to address that by opening the repo window to NBFCs - the competition should make the banks cut rates...but I doubt that will also work. The deleveraging happening worldwide is killing. Everyone will just hoard the cash.

But the RBI response has to be to lower rates continuously, until something happens. And the government needs to cut fuel rates immediately. Then inflation will not be a problem; and hopefully lower prices will encourage spending. But I think it will be a tough thing in this conservative country.

I've been in Delhi for a week, and am back now. Trading with a fund starts tomorrow, and it should be a fun few weeks going forward!

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This entry was posted on Sunday, November 2nd, 2008 at 4:02 PM and is filed under Uncategorized. You can subscribe to any comments to this entry via RSS 2.0. You can leave a response, or trackback from your own site.

About the Author: Deepak Shenoy
http://www.capitalmind.in
The man behind Capital Mind. Deepak is a co-founder at MarketVision, a financial knowledge company in Gurgaon. He also provides data research and consulting services in the financial markets space. Connect with him at deepakshenoy@gmail.com.

4 comments “Interest Rates Drop, SLR lowered and more”

>Hi,
When do you think one should start invest for long term. What are the companies/sectors one has to start looking into it? Can you share your ideas.

kanagala
11.03.08 at 12:46 AM
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>why do u say that banks are unwilling to lend? the latest RBI data shows robust growth in bank credit…is there is a problem of trust (as is the case in the west), why isn’t it showing in the data?

Ravi Purohit
11.03.08 at 3:20 AM
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>Trading with a fund starts tomorrow, and it should be a fun few weeks going forward!

Started your fund Deepak? Happy Diwali and all the best!

Regards

Anonymous
11.03.08 at 6:08 AM
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>Since the Banks are lending.. liquidity still a issue..
Do you think there will be fall in the market again this week..

Anonymous
11.03.08 at 7:26 AM
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