Banks may cut retail lending rates. This is thanks to the Reserve Bank of India cutting a key reserve ratio. The RBI, on Tuesday, surprisingly cut the statutory liquidity ratio (SLR), which requires banks to park a slice of their deposits in Central and State government securities, from 24 per cent to 23 per cent.
The SLR cut can enhance liquidity in the system by about Rs 62,000 crore. This has to be seen in the context of deposit growth lagging credit expansion and the need for creating capacity among banks to handle possible liquidity pressures.
Banks are unlikely to cut short-term deposits rates due to competition from liquid schemes of mutual funds, but they could revisit the long-term deposit rates in view of the SLR cut. The central bank, however, left key policy rates, repo rate (the interest rate at which banks borrow funds from RBI) and reverse repo rate (the interest rate at which banks park surplus funds with RBI) unchanged at 8 per cent and 7 per cent, respectively.
The RBI has said that the primary focus of the policy remains inflation management. FY13 GDP growth has been revised lower to 6.5% from 7.3% earlier. The RBI has struck an appropriate balance between inflation and growth. Delay of weak Monsoon affects highly more on inflation and growth.
The rate sensitive banking space has tumbled Bank of Baroda, State Bank of India ,YES Bank, HDFC Bank, UCO bank, Dena Bank ,PNB,Allahabad bank.
As per Excepts says, Now the market sentiment remain choppy between GROWTH V/S INFLATION, DOLLAR V/S RUPEE, EURO V/s YARN . This strategy runs till improvement comes .
In such situation, investors should INVEST with positive mind set and go for building up of strong portfolios.
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