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Economy

Interest Rates Drop, SLR lowered and more

RBI has announced a 1% drop in Cash Reserve Ratio (% of deposits that get deposited in RBI) and a 1% drop in the Statutory Liquidity Ratio (% of deposits in certain govt. bonds). And, a 0.5% drop in the repo rate – the rate which banks can get money from RBI.

Unfortunately none of the banks want to lend. Rather, they’re happy to pay higher for deposits – still advertising the 10-10.5% deposit rates. And they will not cut lending rates – they’re eating up the spread.

The RBI has tried to address that by opening the repo window to NBFCs – the competition should make the banks cut rates…but I doubt that will also work. The deleveraging happening worldwide is killing. Everyone will just hoard the cash.

But the RBI response has to be to lower rates continuously, until something happens. And the government needs to cut fuel rates immediately. Then inflation will not be a problem; and hopefully lower prices will encourage spending. But I think it will be a tough thing in this conservative country.

I’ve been in Delhi for a week, and am back now. Trading with a fund starts tomorrow, and it should be a fun few weeks going forward!

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