The biggest takeaway from this week’s monetary policy announcement is that the RBI is not willing to toe the line of the government.
In fact, this stance proves a point that the Indian economy is in good hands by way of a Central Bank that does dare to challenge the government, sending out clear signals that it (the government) has to work harder towards taming inflation.Many sectors were hoping against all odds that Mr. Rajan would cut the rates this time around that would spur growth across various industries, but that was not to be. RBI wants to see more resilient inflation levels before it starts taking a lenient stance.
The lending rates would maintain their status quo at least till February 2015 when the central bank would announce its last monetary policy for the fiscal and it has given a glimpse of hope that it might consider cutting rates even outside policy review dates (not necessarily on the policy announcement date scheduled for February 2).
The repo rate (the rate at which banks borrow on short-term basis from RBI) remains unchanged at 8% with CRR and SLR being maintained at 4% and 22% respectively.
The home loan rates that are currently hovering in the range of 10 to 10.25% would invariably continue to be at these levels, which actually may not be a bad thing.
Going forward, with global oil prices easing and import restrictions on gold being removed, inflation is expected to go down further giving a good cushion effect for the economy.
Expectations In the days to come the interest rates on housing loan may come down to as low as 8%, taking us back to 2006-07 days when the rates were as low as 7% to 8%. Those who have been boxed into paying higher EMIs would be breathing easy a few months from now and those who would be availing themselves of new loans would be getting loans at cheaper rates with lower outflow of monthly payments.
This is an ideal time to lock into floating rate loans whose benefits would be reaped over the next couple years since banks and housing finance institutions would be happy to pass on the lower interest rates benefit to their customers.
