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y The RBI did not change CRRF or Bank Rate and kept these at 6. y .5 per cent to 5.y Tuesday. y Reverse Repo Rate has been raised under the LAF by 50 basis points from 4.0 per cent. RBI raised its key policy rates for the fourth time this year. taking more steps to control soaring prices even as the economy shows a strong rebound.0 per cent to 4. Repo Rate has been increased under the Liquidity Adjustment Facility (LAF) by 25 basis points from 5.50 per cent with immediate effect.75 per cent with immediate effect.
This means that prices of food items and other essential commodities are expected to drop over the next 6-9 months.y The RBI hopes that its move will help: y 1. Moderate inflation by reining in demand pressures and inflationary expectations. Reduce the volatility of short-term rates in a narrower corridor. . y 4. Generate liquidity conditions consistent with more effective transmission of policy actions. y 2. y 3. Maintain financial conditions conducive to sustaining growth.
commercial banks normally increase their lending rates: meaning. car loan. they hike interest rates for home loans. But one more round of increase in key rates by the RBI will lead to a hike in home loan. personal loans. etc rates . personal loan. y Experts meanwhile feel that banks are unlikely to hike lending rates in the short term even though the RBI hiked interest rates more than expected.y After a rate hike. car loans. etc.
The RBI's stance to increase rates was influenced by three major factors y First.4 per cent growth in 2009-10 despite weak global growth and the insignificant contribution of the agriculture sector is a testimony of the resilience of the Indian economy. Given the spread and persistence of inflation. The 7. domestic economic recovery is firmly in place and is strengthening. y Inflationary expectations also remain at an elevated level. demand-side inflationary pressures need to be contained . with demand-side pressures clearly evident. y Second-inflationary pressures have exacerbated and become generalised. Capacity constraints are visible in several sectors and pricing power is returning to producers.
particularly given the increased generalisation of inflation. while taking care not to disrupt the recovery. lower policy rates can complicate the inflation outlook and impair inflationary expectations. real policy rates are not consistent with the strong growth that the economy is now witnessing. imperative that we continue in the direction of normalising our policy instruments to a level consistent with the evolving growth and inflation scenario. despite the increase in the policy rates by 75 basis points cumulatively. As articulated in previous policy statements/reviews. y It is.y Third. y . therefore.
y This can impact on bank and loan growth .Eff ct a ks y Raise deposit rates and attract term deposit y Rbi is worried bec a real negative intrest attract depositors to park money in MF and stock.
Benefits t t al f nd y Mutual fund are benefited because they are not to comply with these type of rule. y It has not to maintain CRR. reverse repo rate y Company looks towards the MF for capital need and eating the bank business . REPO RATE .
y Increase the capital inflow y Tight liquidity y No risk y Investor attract .