RBI's 'Means' get their just 'Ends'... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

RBI's 'Means' get their just 'Ends'...

Feb 7, 2007

In a bid to restrict the untrammeled growth in retail credit in the form of housing finance, credit card and auto loans, the Reserve Bank of India (RBI) raised the Repo rate on January 31 (last week) to 7.5%. Repo or repurchase rate is the rate at which the RBI gives loans to banks to tide over overnight fund mis-matches. The banking sector has already lent 72% of its net deposits, and has to compulsorily invest 25% of its deposits in government securities as the Statutory Liquidity Ratio (SLR). That leaves them very tight margins to work on. ICICI Bank, the second largest banking entity in the country, finances approximately 35% of the country's retail credit requirement and is the market leader in car loan business (38% market share). Around 51% of the bank's retail portfolio is garnered through mortgage financing followed by auto loans (20%) and commercial business (12%). The bank has announced a 100 basis points hike in its Prime Lending Rate (PLR) as well as its PLR on home loans and at the same time has raised rate on its tax-saving 5-year term deposits by 125 basis points to 9.5%. The EMI for Rs 15 lakh, 15-year home loan will increase by around Rs 1,000.

Inflation in India is more a function of higher aggregate demand than cost push. Over the last decade, inflation has peaked after the Index of Industrial Production had peaked. Past four years of continuous industrial growth has raised general demand for goods and services with most asset-prices going through the roof. With banks raising their interest rates, the extremely price-sensitive Indians will now think twice about buying a new vehicle or a house for investment. And the monetary authorities will be satisfied with their target being achieved.

Equitymaster requests your view! Post a comment on "RBI's 'Means' get their just 'Ends'...". Click here!


More Views on News

These Stocks Have Rallied Over 300% In the Last 12 Months. Is the Rally Justified? (Views On News)

Nov 12, 2021

As many as 150 stocks from the BSE 500 index deliver multibagger returns in the past one year.

Ultimate Guide to Hedging Your Portfolio (Fast Profits Daily)

Sep 21, 2021

How can you protect your portfolio in a market crash? Find out in this video.

Ride the Indian Real Estate Revival with this 'Different' Smallcap Stock (Profit Hunter)

Mar 23, 2021

Affordability in the housing segment has never been so good in last one and a half decade. Here's how you could make the most of it...

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms