In a major rate cut announced by the RBI today, it has cut the Repo rate and Reverse Repo Rate by 100 basis points or 1% each to boost growth in the economy. Repo rate is the rate at which RBI lends money to other banks in the country.Repo rate now stands at 6.5% from 7.5% previously. And Reverse repo rate is the rate at which other banks park their excess money with RBI.Reverse Repo rate now stands at 5% from 6% earlier.

But the Cash Reserve Ratio(CRR) which is the proportion of deposits the banks must keep with the RBI has not be changed and is at 5.5%. Repo rates and Reverse Repo rates are lowest in 2 and 3 years respectively. These measures have been taken in order to boost the economy and shore up investors confidence in these turmoil economic conditions. The other good news is that from Dec 6,2008, the petrol and diesel prices have come down by Rs 5 and Rs 2 respectively. However the LPG and Kerosene prices are unchanged.

Meanwhile the sensex and nifty broke some psychological levels in yesterdays trade. Sensex closed below the 9000 level mark at 8965 losing 265 points.Nifty closed at 2714 losing 73 points.The rate cuts will boost the markets in the coming week hopefully. Reacting to these ICICI has reduced its home loan rates from 13% to 11.5% for loans upto Rs 20 lakh.

You can read the RBI’s Press Release on Growth Stimulus plan which will come in due course here. It is a detailed report on the current economic secnario and some of the Govt plans. All these developments are sure to give a boost to the stock markets. In another development Ashok Chavan will be the new CM of Maharashtra after Mr.Vilas Rao Deshmukh resigned from the CM’s post few days back.

 

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