RBI cuts repo rate by 0.25%, but warns room for further easing limited
Mumbai,March 20, 2013: The Reserve Bank of India (RBI) cut its key repo rate -- the rate at
which the central bank lends short- term money to banks -- by 0.25 per
cent to 7.5 per cent on Tuesday. The central bank left the cash reserve ratio (CRR) -- the proportion of
deposits that banks have to mandatorily park with the RBI -- at 4 per cent, the lowest since December 1974.
However, the RBI has cautioned that even as the policy stance emphasises
addressing the growth risks, the headroom for further monetary easing re mains quite limited. The caution reinforced market expectations that
the central bank will only lower them by a further 25 or 50 bps in the next fiscal year starting April 1, 2013.
Montek Singh Ahluwalia, Deputy Chairman at the Planning Commission,
said, "_We are looking at it (the 25 bps rate cut) with unhappiness. We fee l, the signal should have been stronger... Many people would say
that the signal should have been more robust than 25 basis points."
This is the second policy rate cut by the RBI this calendar year to help
revive a faltering economy, taking comfort from moderating core price pressures and the government's commitment to trim the fiscal deficit.The RBI had reduced the repo rate by 25 basis points to 7.75 per cent in
January after holding it steady for nine months. The central bank expressed growth concerns, saying headline inflation is
likely to remain range-bound at the current levels over the next fiscal year.
"Notwithstanding the moderation in non-food manufactured products
inflation, the headline inflation is expected to be range-bound around
current levels over 2013-14," the central bank said in a statement issued on Tuesday.Source: NDTV
RBI probing charges of money laundering, ICICI, HDFC & Axis Bank under lens
MUMBAI, March 15, 2013: The Reserve Bank of India has begun a probe into allegations that staff at Axis Bank
encourages customers to evade income-tax payments, siphon off funds overseas, and convert politicians' bribe funds to legally acceptable wealth.
The central bank's probe follows a sting operation by Cobrapost.com, an online news provider, which claimed
that staff at these banks was helping customers do deals that violate income-tax, enforcement and banking laws, said three people familiar
with the development. "We are in touch with banks," Deputy Governor Urjit Patel said at the sidelines of a conference. "No show-cause notice has been sent as yet,"
he said. Bankers' advice to avoid tax ranges from declaring oneself as a farmer to
opening multiple accounts with small amounts that could escape the taxman's radar. Other tips include use of other
customers' accounts for a fee, and a shell company to account for overseas travel and other expenses.
"RBI has asked for preliminary reports and we have sent them," said an
executive from one of the banks who did not want to be identified. "Once our enquiries are over, we will send our findings.
There are enough checks and balances." No transaction seems to have taken place. Some silly conversations in
bravado," said the executive.
Aniruddha Bahal, editor, Cobrapost.com, said the three top private banks have been helping customers launder money
for years and their branches across the nation offer escape route to those with ill-gotten wealth. Bahal claimed these activities and advice
provided by bankers have been recorded for months, running into hundreds
of hours, in a sting operation by its Associate Editor Syed Masroor Hasan , posing as Rajeev Sharma.
"The investigation finds the banks and their managements systematically
and deliberately violating several provisions of the Income-Tax Act, FEMA , RBI regulations, KYC norms, Banking Act
and Prevention of Money laundering Act with utter disregard to consequences, driven by their desire to boost cheap
deposits and thereby increasing their profits," Cobrapost.com said in a statement.
RBI cuts repo rate: Banks to pass on benefit to customers; lower lending rates
MUMBAI, January 29, 2013: Banks will cut lending rates after the
Reserve Bank of India reduced its key interest rate by 25 basis points on Tuesday, the head of industry body Indian Banks' Association, KR
Kamath, said in a post-policy conference. Borrowers could as a result see better days ahead as lending rates will
come down. State Bank of India Chairman Pratip Chaudhuri also said banks are likely to cut lending rates.
Commenting on RBI's action, SBI Managing Director A Krishna Kumar said "a rate cut is likely. Rates on
advances and deposits could come down simultaneously. The RBI's action is positive".
Keki Mistry of HDFC said that CRR cut, which has come as a pleasant surprise will benefit
banks. "Repo and CRR rate cut will help lenders lower rates," he told ET Now.
Indian Overseas Bank executive director A K Bansal said the RBI's action
will result in moderation of interest rates in the coming days. Both lending and deposit rates are expected to see a downward revision
which will improve growth prospects, he said.
According to Canara Bank executive director A K Gupta, the bank would
consider interest rate cut in the light of RBI policy action.
If the interest rate on a 20 year housing loan of Rs 50 lakh home lowers
to 11% from 11.25%, it will translate into a saving of Rs 853 per month in the EMI.
RBI lowered its key policy rate for the first time in nine months on
Tuesday, but struck a cautious note on further easing as it waits to see
how the government's upcoming budget aims to bring a bloated fiscal deficit under control.
With more rate cuts by the RBI on the horizon this year, new borrowers
stand to gain as banks pass on the benefit to them. If they also cut their benchmark base rates (to which home loan rates
are linked), it will benefit the existing borrowers as well. Source: The Economic Times