RBI may hike rates, real estate to take hit
Mumbai, Jan. 28: The Reserve Bank is likely to hike cash reserve ratio (CRR), by 0.25 per cent to 0.5 per cent. CRR is the amount of funds that banks have to park with the RBI. The ce-ntral bank may announce some changes in lending norms that may make it tougher for some sectors — notably real estate. Interest rates on loans and deposits with banks could go up by up to one per cent over the next year.
“We are expecting a hike of 0.25-0.5 per cent in the CRR,” says Ms Atsi Sheth of Reliance Equities. She expects the RBI to act because of high inflation, which stood at 7.31 per cent for December. “It won’t be surprising if the RBI also hikes repo and reverse-repo rates, though it isn’t likely,” she adds.The other big action expected from the RBI is tightening of norms for lending to some sectors, notably real estate. “There could be a change in the risk weightage of real estate and mortgage sectors,” says Mr Abheek Barua, chief economist, HDFC Bank. “Another ass-et bubble seems to be bui-lding up here. Credit inflow to the sector also seems hi-gh,” he adds. However, a rate hike by RBI is not expected to translate into higher interest rates on bank loans. This is because the financial system is sitting on extra cash.
Over the next 12 months however, rates on deposits and borrowings are expected to increase about one per cent.
Age Correspondent
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