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Chennai Jan 31 Home loan rates may not go up just now. That's the bottom line after the announcement of the RBI policy review. The measures, including raising risk weights and increasing the provisions made by banks, are aimed specifically at bank lending towards commercial real estate. The RBI is not comfortable with the kind of credit growth seen here and is clearly trying to steer banks away from that sector. Residential housing loans would not be affected.

Speaking at the press conference, Dr Y.V. Reddy, RBI Governor, said that while the RBI would not take a view on asset prices, it could not allow a situation where a bubble was built and allow it to burst later. It had to take pre-emptive action and the steps announced were in that direction.

Emphasising strongly that the measures announced were aimed at containing inflation, he said that it did not endanger growth. On the contrary, high inflation would give rise to imbalances and distortions, he said.

Asked if the bank rate, the signalling rate for medium-term interest rates in the economy (currently at 6 per cent), was not relevant any longer, Dr Reddy said the RBI was examining the issue and would put out a paper soon.

Dr Reddy also said banks were told that they should take recourse to the RBI's refinance window only for a short period.

Earlier, Dr Reddy began the conference with a cheery quip, alluding to his capacity to take markets by surprise in the past, through the timing of his rate raising or reduction moves. He said, with a twinkle, "I was told that the surprise was that there was no surprise. The surprise today was that I delivered what the market expected!"

More Stories on : Credit Policy | Housing Finance | Interest Rates

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