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Impact of Recent Monetary Review of RBI

Measures: Cut in repo & reverse repo rates by 25 bps

Impact: Though banks are reluctant to cut rates, some will prune their deposit rates within a month; rates for certificate of deposit (CD) were already down on Tuesday. Lending rates could soften at a later stage.

Measures: Payment of interest on savings bank account on a daily product basis, wef April 1, 2010

Impact: Savers will get more out of their savings account and banks’ total payout would be much more. So, if an investor parks Rs 2 lakh and withdraws it 2 days later, she will get interest for two days instead of the lowest balance between 10th and 30th of a month.

Measures: Review BPLR system; make credit pricing more transparent

Impact: RBI wants banks to lower the prime lending rate (PLR), so that the interest rate comes down not just for new borrowers but also for existing corporates and individuals (like home and car loan borrowers).

Measures: Up to Rs 1-crore loans against NRI deposits

Impact: Currently, loans up to Rs 20 lakh are allowed against FCNR (dollar) and NRE (rupee) deposits of NRIs. A higher limit may give banks some opportunity to lend in this segment.

Measures: Banks and non-banks to issue prepaid cards

Impact: Such cards are common in other markets. An individual pays the issuer the money, gets a card of that denomination, uses it to buy groceries or pay his phone bill and refills the card by again paying to the card issuer.

Measures: Liberalisation on buyback of FCCBs

Impact: Doubling the buyback amount to $100 million will interest some of the corporates whose FCCBs are trading at steep discounts. Close to 10 large and mid-sized corporates would be interested in such transactions.


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