RBI moves start making an impact

February 22, 2007: The Reserve Bank of India's attempts to control the high credit growth seem to be bearing fruit.

The central bank has hiked the repo rate four times by 25 basis points each and the CRR twice by 50 basis points each in the current financial year. Bankers say they already witnessing a slow down in the demand for credit , particularly in retail loan segment.Though the effect of the latest 50 basis point CRR hike last week is yet to kick in, early indications are that the December CRR hike has done some damage to the credit growth.

"There has been a slowdown in home loans. Home loans, which were growing by 30-35% last year, are now growing just by 20-25%".

State Bank of India, the country's largest bank, has also seen a slowdown in home loans issuances following the CRR hike. "January has seen some slowdown and we expect the trend to continue.The overall portfolio for home loans from April-December 2006 is also lower than in the same period in 2005," a SBI official said.

Smaller banks such as Centurion Bank of Punjab are also feeling the pinch. "Home loan growth has slowed down since January compared with April-December 2006,"