1. Reserve Bank of India may revise REPO rates following currency infusion

Reserve Bank of India may revise REPO rates following currency infusion

The banking sector may be flushed with liquidity within the next two months, for which they may have to resort to aggressive lending, felt a top official of the Reserve Bank of India.

By: | Kolkata | Published: November 13, 2016 5:15 PM
The RBI in the coming months in expected to reduce REPO rates by at least 2%, which will make loans cheaper. (Reuters) The RBI in the coming months in expected to reduce REPO rates by at least 2%, which will make loans cheaper. (Reuters)

The banking sector may be flushed with liquidity within the next two months, for which they may have to resort to aggressive lending, felt a top official of the Reserve Bank of India. The official on the condition of anonymity said’ “with the step of demonetisation it is expected that the country’s banking system will get fresh currency infusion worth Rs 17 lakh crore, which will call for aggressive lending for circulating the money within the system.

The RBI in the coming months in expected to reduce REPO rates by at least 2%, which will make loans cheaper. There are high probabilities that home loans come down to sub 7% and demand for housing goes up, the RBI official said.

According to Getambar Anand, national president CREDAI, the real estate industry has been mainly catering to the primary market, which aggressively avail home loans. India has a documented shortage of housing and if loans become cheaper the demand will grow. Besides, demonetisation will suck excess liquidity from the system, which means inflationary pressure on real estate will come down, which down the line will bring stability on the prices. “This could be possible in as soon as the next 6-12 months and the real estate sector, which is in compliance with transparent and fair practices like RERA is bound to grow,” Anand said adding that the current real estate market was at the best possible price point with a thin margin for the developers but in the changed scenario the financial institutions could enable higher home buying.

Meanwhile, traders have started suffering with 80% of the cash transaction getting affected for shortage of currency. Citing example of the whole sale and retail markets of Kolkata, of which Posta Bazaar is eastern India’s biggest commodity market, AR Kajaria, president of the Federation of West Bengal Trade Association, said the whole sale and the retail markets of Kolkata cumulatively registers an average turnover of Rs 200 crore a day, which has come to a halt. Although there are transactions in cheques and methods of e- transactions practiced but there are little means to avoid petty cash transactions, which are not less than Rs 10-12 crore a day.

“How can a truck driver meet his road expenses without cash? Between Kolkata and Varanasi toll taxes costs above Rs 2000. There is no mechanism in place as yet to pay toll without cash. Even the petty cash expenses are huge and there is no availability of currency to meet this expenditure.” Kajaria said.

Mahesh Singhania, chairman of the Federation of Trade Association, said it was queer of the government to expect that business person could run their activities by withdrawing Rs 20,000 from the bank per week. “How can a valid pan based account holder be restricted or denied to withdraw more than Rs 20,000 per week?” Singhania said.

He said more than 80% of the cash transaction business in the state has been affected and corresponding VAT tax collection and other tax collection has also been affected.

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