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Rate hike may increase cost of funds for consumers: M3M India

Demand for affordable and mid-end real estate projects may be adversely impacted due to a possible hike or adjustment in home loan rates

October 30, 2013 9:15 IST | India Infoline News Service
The RBI (Reserve Bank of India) in its Second-Quarter Review of Monetary Policy 2013-14 today hiked the repo rate by 25 bps (basis points) to 7.75%. The central bank kept the CRR (cash reserve ratio) unchanged at 4%. 

The repo rate is the rate at which banks borrow from RBI and one basis point is equivalent to 0.01%. 

RBI Governor Raghuram Rajan, in his second policy review, has cut MSF (marginal standing facility) rate to 25 bps to 8.75%. MSF rate is an overnight borrowing rate for banks, which eases the cost of funds for lenders, fuelling credit growth.

The central bank expects GDP at 5% in FY13-14 and CPI to remain at or above 9%.
Commenting on RBI policy, Pankaj Bansal, Director of M3M India, said, “As anticipated, RBI has returned to a more normal monetary policy situation by cutting the MSF and raising the repo rate. This may result in further increasing the cost of funds for any industry or end consumers. Further dampening demand and industrial production.

“Demand for affordable and mid-end real estate projects may be adversely impacted due to a possible hike or adjustment in home loan rates. Expensive properties may not be negatively affected drastically as their demand is relatively inelastic and volumes not very large.”



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