Monday, October 30, 2006

India Raises Rate for Fourth Time to Curb lending/Inflation

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India Raises Rate for Fourth Time to Curb Inflation

India's central bank increased a key interest rate for a fourth time this year as record economic expansion and lending stoke inflation.

Governor Yaga Venugopal Reddy raised the Reserve Bank of India's repurchase rate by a quarter-point to 7.25 percent. The central bank kept its reverse repurchase rate unchanged at 6 percent...

....India's central bank is increasing the cost of credit to curb inflation, which rose to a four-month high of 5.26 percent in the second week of October. Consumer prices paid by urban dwellers rose to a seven-year high of 6.6 percent last month, while prices paid by farmers gained to almost an By raising the repurchase rate at which the Resereight-year high of 7.34 percent...

By raising the repurchase rate at which the Bank lends overnight, the central bank is trying to increase borrowing costs in particular to housing and retail, the fastest growing banking segments, and slow near-record loans growth.

More Increases
The central bank has left unchanged the reverse repurchase rate, or its overnight borrowing rate, as it wants to maintain enough money in the banking system to support economic growth at the same time....( as if the money supply isn´t grwoing fast enough with close to 20%!als wenndie geldmenge nicht schon schnell genug wachsen würde...)

Money supply rises by 18.5%

Lending Growth
Commercial banks' loans to companies have risen about 30 percent since April 1 from the same period last year, ...

ICICI Bank, India's most valuable, expanded loans by 47 percent in the third quarter from a year earlier, the Mumbai- based lender said Oct. 26. ICICI Bank and State Bank of India are ranked No. 2 and No. 3 among stocks on the benchmark Bombay Stock Exchange Sensitive Index since the central bank's last rate increase in July, both gaining about 50 percent as the Sensex has risen 25 percent.

Indian lenders may be moved to a higher risk category, Fitch Ratings said on Sept. 27, as unabated loans growth may lead to a ``systemic crisis'' in the banking industry.

India tops a global consumer confidence index of 40 biggest countries for the third year in a row in 2006, according to AC Nielsen Co., a New York-based market research firm. The South Asian nation's manufacturing production growth increased to almost a six-year high in August.

`Very Dynamic'
``India is really a story of a very dynamic domestic market,'' said Michala Marcussen, a strategist with Societe Generale Asset Management in Paris. ``The risk is the typical overheating scenario, very strong domestic demand leading to growing inflationary pressures and ultimately forcing the central bank to tighten significantly.'' ......


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