The apex bank has cut CRR by 50 basis points to five per cent, short-term lending (repo) rate by 100 basis points to 5.5 per cent with immediate effect and short-term borrowing (reverse repo) rate by similar percentage points at 4 percent. The cut in CRR would lead to infusion of Rs 20,000 crore into the system over and above Rs 3,00,000 crore (Rs 3000 billion) injected since October 2008.
Current rates now are:
CRR 5%
Repo Rate 5.5%
Reverse Repo Rate 4%
Showing posts with label RBI. Show all posts
Showing posts with label RBI. Show all posts
Saturday, January 3, 2009
Sunday, December 7, 2008
RBI rates cut since October 2008
October
On October 6, 2008 the Reserve Bank of India announced a reduction of the cash reserve ratio (CRR) for scheduled banks by 50 basis points to 8.5 per cent of net demand and time liabilities (NDTL) with effect from the fortnight beginning October 11, 2008. No change in repo and reverse repo rate
October 10, 2008 RBI decided to reduce CRR by 150 basis points to 7.50 per cent of NDTL with effect from the fortnight beginning October 11, 2008 instead of the 50 basis points reduction announced on October 6, 2008 i.e. an additional 100bp reduction in CRR after October 6.
On October 20, 2008 RBI announced a reduction in the repo rate under the Liquidity Adjustment Facility (LAF) by 100 basis points from 9.0 to 8.0 per cent.
November
On November 1, 2008 RBI took following measures:
1. Reduce the repo rate under the Liquidity Adjustment Facility (LAF) by 50 basis points to 7.5 per cent with effect from November 3, 2008
2. The cash reserve ratio (CRR) of scheduled banks is reduced by 100 basis points from 6.5 per cent to 5.5 per cent of net demand and time liabilities (NDTL). This will be effected in two stages: by 50 basis points retrospectively with effect from the fortnight beginning October 25, and by a further 50 basis points prospectively with effect from the fortnight beginning November 8, 2008
3. RBI has also lowered the statutory liquidity ratio (SLR) by 100 basis points to 24 per cent
December
On December 6th, RBI further announced rates cut. The short-term lending rate (repo) will fall from 7.5% to 6.5% and borrowing (reverse repo) rate to 5 per cent with effect from December 8. RBI has since October reduced the short-term lending rate by 250 basis points. After several months, the central bank has slashed the reverse repo to 5 per cent. The RBI, however, did not change cash reserve ratio, the amount of deposits which banks are required park with the apex bank.
Current Rates Figure
CRR = 5.5%
Repo Rate = 6.5%
Reverse Repo Rate = 5%
On October 6, 2008 the Reserve Bank of India announced a reduction of the cash reserve ratio (CRR) for scheduled banks by 50 basis points to 8.5 per cent of net demand and time liabilities (NDTL) with effect from the fortnight beginning October 11, 2008. No change in repo and reverse repo rate
October 10, 2008 RBI decided to reduce CRR by 150 basis points to 7.50 per cent of NDTL with effect from the fortnight beginning October 11, 2008 instead of the 50 basis points reduction announced on October 6, 2008 i.e. an additional 100bp reduction in CRR after October 6.
On October 20, 2008 RBI announced a reduction in the repo rate under the Liquidity Adjustment Facility (LAF) by 100 basis points from 9.0 to 8.0 per cent.
November
On November 1, 2008 RBI took following measures:
1. Reduce the repo rate under the Liquidity Adjustment Facility (LAF) by 50 basis points to 7.5 per cent with effect from November 3, 2008
2. The cash reserve ratio (CRR) of scheduled banks is reduced by 100 basis points from 6.5 per cent to 5.5 per cent of net demand and time liabilities (NDTL). This will be effected in two stages: by 50 basis points retrospectively with effect from the fortnight beginning October 25, and by a further 50 basis points prospectively with effect from the fortnight beginning November 8, 2008
3. RBI has also lowered the statutory liquidity ratio (SLR) by 100 basis points to 24 per cent
December
On December 6th, RBI further announced rates cut. The short-term lending rate (repo) will fall from 7.5% to 6.5% and borrowing (reverse repo) rate to 5 per cent with effect from December 8. RBI has since October reduced the short-term lending rate by 250 basis points. After several months, the central bank has slashed the reverse repo to 5 per cent. The RBI, however, did not change cash reserve ratio, the amount of deposits which banks are required park with the apex bank.
Current Rates Figure
CRR = 5.5%
Repo Rate = 6.5%
Reverse Repo Rate = 5%
Tuesday, November 4, 2008
Banks to cut rates
Yesterday I wrote about the effect of RBI rates cut. I was wondering whether banks will cut rates or not. Today after the meeting between FM and bankers, public sector units have decided to reduce rates by up to 75bp. Moreover, FM promised to provide adequate liquidity to the real estate sector. RBI would soon take a decision on extending a line of credit of Rs 10,000 crore to the National Housing Bank to ensure that adequate funds were available for the housing sector. Privates banks such as ICICI and HDFC have hinted on lowering rates as well. This might has brought some smile on the faces of Mr. K.P. Singh and Mr. Chnadra who were active lobbying for the same.
These development gave positive news to the market. Investors showed interests in beleaguered real estate companies. The BSE Realty index turned best performer among sectoral indices, with a hefty rise of 12.14%. The next thing to ponder over is whether banks will lower risk aversion for developers.
These development gave positive news to the market. Investors showed interests in beleaguered real estate companies. The BSE Realty index turned best performer among sectoral indices, with a hefty rise of 12.14%. The next thing to ponder over is whether banks will lower risk aversion for developers.
Monday, November 3, 2008
RBI reduces rates - Lifeline for developers?
On Saturday, November 1st, RBI slashed CRR by 100bp and repo rate by 50bp. Will it help the developers or buyers? Lets examine this.
Real estate developers are struggling with a number of factors such as low demand, high interest rates and credit crunch. RBI's recent move to lower CRR and Repo rate may inject more than Rs. 60,000 crores in the market. But this may not percolate into a lower interest rates either for buyer or corporate. This is because of "risk aversion" attitude adopted by the banks. The yeild spread (difference between govt bond and AAA corporate bonds rating) is around 400bp, which is extremely high. This shows that banks are still wary of lending to corporates. Situation is worse for real estate companies which do not come under AAA rating. For example DLF's credit rating is AA, Omaxe's is A- whil other developers'ratings are BBB or less. This put them in extremely risky category pushing corporate borrowing rates of moe than 16%. Developers such as Unitech, HDIL, Omaxe, Orbit Corporation and Sobha Developers have borrowed aggressively in the last three years to support their ambitious expansion plans. Now they are facing a slowdown in the demand for the properties, which would serioussly affect their cash flows in the coming month. They are now over-leveraged; thus have limited option to raise debt.
So unless the risks aversion reduces, I see little chances of interest rates or corporate borrowing rates to come down. Moreover, banks have not decided on the lending rates yet. So RBI's recent move may or may not lower housing loans.
Real estate developers are struggling with a number of factors such as low demand, high interest rates and credit crunch. RBI's recent move to lower CRR and Repo rate may inject more than Rs. 60,000 crores in the market. But this may not percolate into a lower interest rates either for buyer or corporate. This is because of "risk aversion" attitude adopted by the banks. The yeild spread (difference between govt bond and AAA corporate bonds rating) is around 400bp, which is extremely high. This shows that banks are still wary of lending to corporates. Situation is worse for real estate companies which do not come under AAA rating. For example DLF's credit rating is AA, Omaxe's is A- whil other developers'ratings are BBB or less. This put them in extremely risky category pushing corporate borrowing rates of moe than 16%. Developers such as Unitech, HDIL, Omaxe, Orbit Corporation and Sobha Developers have borrowed aggressively in the last three years to support their ambitious expansion plans. Now they are facing a slowdown in the demand for the properties, which would serioussly affect their cash flows in the coming month. They are now over-leveraged; thus have limited option to raise debt.
So unless the risks aversion reduces, I see little chances of interest rates or corporate borrowing rates to come down. Moreover, banks have not decided on the lending rates yet. So RBI's recent move may or may not lower housing loans.
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