Who wrote this article?

Deepak Shenoy, Capitalmind's research team.

What topics does this article cover?

Interest rates, Short Only, SLR

Interest Rates Drop, SLR lowered and more

2 Nov 2008Deepak Shenoy1 min read

Quick Facts

What is "Interest Rates Drop, SLR lowered and more" about?
What category is this article in?: Economy
Who wrote this article?: Deepak Shenoy, Capitalmind's research team.
When was this article published?: Published 2 November 2008.
How long does this article take to read?: 1 min read
What topics does this article cover?: Interest rates, Short Only, SLR

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!