Business Daily from THE HINDU group of publications
Friday, Oct 05, 2007
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Business Daily from THE HINDU group of publications Friday, Oct 05, 2007 ePaper |
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Interest Rates Markets - Stock Markets
BL Research Bureau The move towards lower Indian interest rates seems to have gathered some momentum if the reduction in home loan rates by some of the leading institutions such as HDFC and Canara Bank are any indication. Some uncertainty, though, persists about the near term course of interest rates as indicated by ICICI Bank’s move to introduce floating rates on its retail loans also. Headline inflation has come down substantially in the past several weeks and is ruling below 4 per cent for some time now. This combined with a strong pick up in liquidity (courtesy the FII inflows), holds the potential for pushing interest rates into a lower range over the next 3-6 months. Emerging EnvironmentThis augurs well generally for the financials of India Inc — particularly for the non-financial corporate sector—in terms of lower borrowing costs. Credit offtake by industrial borrowers has come down noticeably in the past 6 months on account of the firmness in interest rates. This may be corrected if the move to lower interest rates is sustained—as seems very possible—in the emerging environment. The pick up in credit may also boost the interest incomes of banks and other lenders. The financials of banks/FIIs, though, may get a better boost if the rate reductions on the lending side are combined with reductions in their borrowing (deposit) costs also. More Stories on : Interest Rates | Stock Markets
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