RBI Raises CRR and Repo : Money to get more expensive in India

This is a short post to keep you updated on the monetary situation in India... Inflation at 6.5%, CPI at 8%

RBI feels that there is too much liquidity even at this stage and is concerned about the Inflation pressures.. so, they have reacted yesterday by raising CRR [ Fed Reserve Requirement ] and Repo Rate [ Fed Funds Rate ] .. ( Equivalent Us terms have been provided as links for reference.

CRR has been raised to 6.5% [ 2 phases to be in place by April end ] while REPO to 7.75%.

So, get ready for another hike in home loan, auto loan and other loan rates. Also bank deposits will fetch a much better return than investing in many other instruments in the short term. Bank profitability and small and medium size companies will be hurt most due to this squeeze..

This may also be a chance to buy that dream house or plot at a lower price.. will update the situation once the banks announce their decisions on interest rates.

Finance & Economy