RBI gives rate hike a break

APRIL 24, 2007:The Reserve Bank pressed the pause button on rate hikes, while sending clear signals to banks for a marginal reduction in interest rate for small home loan borrowers.

Though it did not tweak key short-term lending (repo) and borrowing (reverse repo) rates or announce monetary measures to check prices and the appreciating rupee, RBI Governor YV Reddy said the central bank will act 'swiftly' if needed as the policy stance was to keep inflation under check with a medium term goal of 4-4.5 per cent.

He also reduced the risk provisioning for Home Loans up to Rs20 lakh, from 75 per cent to 50 per cent, to act as an incentive for banks to meet genuine housing demand at attractive rates.

"While the total exposure of loans up to Rs20 lakh do not very much affect the banking industry, a large number of people are affected by it

Punjab National Bank softening of interest rate on housing loan by up to half a percentage point.But other public sector banks and private sector banks did not indicate the possibility of a reduction in home loan rates.

Source: dnaindia