The SLR cut would typically translate selling of G-Bonds and other securities by banks / dealers.
Would improve the 10 year benchmark yield as the demand would decrease and prices would fall. (Yields would move up)
This should bring in Rs. 35000 crore liquidity into the Indian market
Saturday, November 1, 2008
How does or should REPO CUT help?
The repo cut would (rather should) bring about the following
1. Bring down the Overnight (Call rates) which have climbed up to 21%.
2. Interest rate on loans for retail customers would be relaxed
3. Expand the flow of credit from Banks (so that banks start lending) that are simply sitting on huge pile of cash taking an overly cautious approach on borrowers. Redemption pressures on Mutual Funds would reduce.
4. The M2M of G-sec and C-debt papers would become attractive as 10 year benchmark yields (prices would raise) would fall further.
1. Bring down the Overnight (Call rates) which have climbed up to 21%.
2. Interest rate on loans for retail customers would be relaxed
3. Expand the flow of credit from Banks (so that banks start lending) that are simply sitting on huge pile of cash taking an overly cautious approach on borrowers. Redemption pressures on Mutual Funds would reduce.
4. The M2M of G-sec and C-debt papers would become attractive as 10 year benchmark yields (prices would raise) would fall further.
RBI cuts REPO, CRR and SLR
RBI has cut the repo rate by 50 bps wef NOV 3.
It has also initiated a 2 stage CRR cut.
1st stage CRR cut of 50 bps would be effective from OCT 25.
2nd stage CRR cut of another 50 bps would be effective from NOV8.
SLR has been cut by 100 bps at 24% wef NOV8.
It has also initiated a 2 stage CRR cut.
1st stage CRR cut of 50 bps would be effective from OCT 25.
2nd stage CRR cut of another 50 bps would be effective from NOV8.
SLR has been cut by 100 bps at 24% wef NOV8.
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