M A I N   N E W S

RBI slashes rates
Shiv Kumar
Tribune News Service

Mumbai, March 4
The Reserve Bank of India (RBI) today announced a 50 basis points reduction in repo and reverse repo rates as part of efforts to moderate the cost of borrowing by a slowing economy. In an announcement made late this evening, the RBI said it was reducing the repo rate by 50 basis points from 5.5 per cent to 5.0 per cent. The apex bank also reduced the reverse repo rate by 50 basis points from 4.0 per cent to 3.5 per cent. The RBI said the new changes would come into effect immediately.

In its statement, the RBI admitted that concerns over rising credit risk together with the slowing of economic activity appeared to have moderated credit growth despite reduction in lending rates by private and public banks. It further warned the banks to guard against rising non-performing assets.

”The Reserve Bank continues to urge the banks to monitor their loan portfolio and take early action, to prevent asset impairment down the road and safeguard the gains of the last several years in improving asset quality,” the RBI said.

At the same time, the RBI said, the banks should price risk appropriately and ensure that creditworthy enterprises continue to get funding. The RBI noted that it had pumped in more than Rs 3,88,000 crore into the economy through various measures. “This sizeable easing has ensured a comfortable liquidity position. The overnight money market rate has remained near or below the lower bound of the LAF corridor since November 3, 2008,” the RBI said.




FICCI: Signal to banks to cut interest rates
Tribune News Service

New Delhi, March 4
FICCI president Harsh Pati Singhania said by cutting the repo rate, the RBI had signalled the banking sector to cut their interest rate for consumers and producers alike. FICCI urges the banks to cut interest rates significantly in the weeks ahead. The small repo rate cut was to discourage the banks from putting liquidity back into the RBI.

However, FICCI is waiting for a composite monetary stimulation package where the reverse repo rate will be pushed down to 3 per cent and in addition to cutting repo rate further, the RBI will stimulate the economy directly as it has done in the earlier package.

FICCI also hopes that the RBI will help in bringing the consumer back to the market by offering interest subvention in housing, automobiles and white goods so that common consumer can afford these products.



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