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Journalism of Courage
Though Finance Minister Jaswant Singh cut the interest rate on small-savings schemes in the Budget, it seems the move is unlikely to have any impact at least till next month on the interest rate scenario in the country.
Reserve Bank of India Governor Bimal Jalan said on Monday there was no urgency to review the Central Bank’s stance on the bank rate as announced in its October credit policy statement. “There is no greater urgency in it,” Jalan said when asked whether the Central Bank would review its stance on the bank rate.
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NBFC interest on deposits down
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| Mumbai: RBI on Monday revised downwards the ceiling on maximum interest rate payable by Non-Banking Financial Companies (NBFC) on public deposits from 12.5 per cent to 11 per cent per annum, effective Tuesday. |
Jalan said the bank’s soft rate bias continued ‘as of now’ and inflation was not putting pressure on rates. However, a section of bankers feel that the RBI will cut the bank rate (the benchmark rate at which the RBI refinances banks) in the next credit policy in April.
However, RBI on Friday cut its key repo rate by 50 basis points to five per cent—its third reduction this fiscal year to March—after the government announced it was lowering returns on some saving schemes by a percentage point. Close on the heels, the RBI also announced a 0.5 per cent reduction in interest rate on saving bank accounts to 3.5 per cent effective from Saturday.
On the other hand, State Bank of India chairman A. K Purwar said it has no immediate plans to cut the interest rate on deposits in the light of rising inflation.
“As a result of the Finance Minister’s move, bankers have been in a dilemma. Bankers have been saying of late that interest rates have bottomed out. One has to wait and see how rates will move in the next a few months,” said a banking source.
Jaswant Singh said on Friday he had signalled to the RBI to lower interest rates by announcing cuts in key investment schemes in the Budget. “I can only signal. I can advise and I can caution, but I cannot dictate,” he said.
