Tuesday, May 3, 2011

RBI Hikes Savings Rate to 4% from 3.5%

 Reserve Bank today raised its short term lending (repo) rate by 50 basis points to 7.25%, while lowering the economic growth projection to 8% for the current fiscal.

The reverse repo, the rate at which bank park funds with RBI, has been raised by 50 basis points to 6.25%. CRR remains unchanged at 6%.

The RBI has also increased the saving bank rate by 50 basis points to 4% to give higher returns to depositors in the wake of high inflation.

Savings rate is increased for the first time since 2003, which is negative for banks having high CASA ratio such as SBI, PNB ICICI Bank, HDFC Bank.

The tighter monetary policy have played spoil sport on Indian markets and the stock markets are heavily down today mainly draggged by the bank stocks

Related article http://investorzclub.blogspot.com/2011/05/should-one-invest-in-banking-stocks-now.html

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