It’s a Hawk, It’s Santa Claus, No it’s Raghuram Rajan, the Superman of Indian Economy

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Anjali Ghosh, EMBA 2015-18, Vinod Gupta School of Management, IIT Kharagpur

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It’s a Hawk, It’s Santa Claus, No it’s Raghuram Rajan, the Superman of Indian Economy

Based on progress on the economic ground of India, Raghuram Rajan the Governor of RBI surprised everyone again on September 29 with another aggressive measure, cut down repo rates, the rate at which the central bank lends to banks by 50 bps. Now the repo rate stands at 6.75%, the lowest the key interest rate has been in four years.

The iron man did not bow down under severe government and industry pressure and waited for the right time when consumer inflation is at a record low. A repo rate cut is being seen as a key trigger to boost investment demand in an economy where credit growth has dipped to a multi-year low.
Rajan stressed that monetary transmission of rate cuts by public and private sector banks would be key although the banks are faring cautiously due to non-performing assets and bed debts. However the public and private sector banks responded to the welcome move by Rajan by bringing down their Basic Lending Rate to which home loans are linked. SBI trimmed down its base rate by 40 basis points to 9.30% the benchmark rate in the banking sector with effect from October 5. Private sector bank leader ICICI Bank reduced its base rate by 35 basis points to 9.35 per cent,. Dena Bank reduces its base rate to 9.7 per cent from 10 per cent Kotak Mahindra Bank reduced its base rate from 9.75 per cent to 9.50 all with effect from October 5 Yes Bank has also trimmed its base rate by 25 bps to 10.25 per cent. India’s largest mortgage lender, HDFC, has reduced its lending rate on housing loans by 25 basis points to 9.65%.

Waiting for more pleasant surprises from you, Mr Rajan.

 

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