Saturday, January 05, 2008

Interest rates likely to fall in coming weeks

NEW DELHI: Interest rates are expected to fall over the next few weeks after finance minister P Chidambaram on Friday expressed his "wish" that lending and deposit rates be cut by 50 basis points.

He also issued an "advisory" to chiefs of PSU banks to focus on lending to the consumer goods sector — both durables and non-durables — in a bid to prop up consumption and production, which have been dropping for the last few months.

"It is important to focus on both investment and consumption... There has been some sluggishness and that is why this advisory," Chidambaram said after meeting chiefs of public sector banks.

While the advisory is expected to make car loans and financing for purchase of consumer goods cheaper, what happens to home loan rates was unclear. Though the minister indicated that the need to moderate home loan flows was no longer required, he was not as candid on the issue. But the overall message was clear: interest rates need to dip.

"If monetary policy is also supportive, it is possible to look forward to stable, and perhaps some moderation, in interest rates," he said ahead of RBI's quarterly policy review.

With public sector banks, which account for nearly 7% of the market, cutting rates, private players would have little option but to follow suit.

1 comment:

Tayaramecanici said...

On friday 4th of Jan'08, SBI had stated they are increasing the savings rate for 180 deposits, which i believe was in line with the RBIs intention to reign the REAL INFLATION i.e. Hold on to interest rates.

Chidambarms subsequent ''Directive '' to reduce interest rates can be seen as a precursor to an early elections, the UPA wouldn't like to see the economy falter before the elections if held in 2009, which is highly unlikely considering the global economic scenario, elections have to be preponed.

IMO UPA would sign on the Nuclear treaty ( before the presidency changes in USA in Nov 2008) and call the lefts bluff on its threat to the coalition, hit the campaign on higher moral ground and better economic conditions ( based on easy/lower credit).

HOUSING, down thee drain. As most of the techies get laid off due to global downturn ( SHELL, CITIBANK are a few declaring downsizing their IT depts ) and offload their INDIAN property portfolio to shore up cash in hand to weather the downturn.