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Friday, October 22, 2021

Inflation will come in the way of debt becoming cheaper Before the festive season

In the midst of the Coronavirus Pandemic, banks are expecting to increase credit demand before the festive season, while consumers are also expected to get more loans. But, now inflation can become a big hurdle in the way of cheap loans. Due to the Corona epidemic disrupting the supply chain and huge government purchases, the mathematics of demand-supply in the retail market has deteriorated. In such a situation, there is a possibility of a strong jump in retail inflation. A report by SBI has said that the retail inflation rate can also go up to 7 percent in August. The Reserve Bank takes into account the retail inflation rate in the reduction of interest rates. Right now the repo rate is at 4 percent.

Banks expect credit growth to increase in the festive season. Due to the COVID 19 epidemic, there has been a significant reduction in the demand for debt. Due to this, before the festive season, before the festive season, you can give many offers including processing fees, waiving the document charge on the retail loan. Despite the decrease in interest rates in the recent few months, the demand for loans in the market remains low. Recently, Punjab National Bank has introduced Festival Bonanza. Under this, the processing fee on all types of retail loans is exempted from the documents fee till December 31. This will make it cheaper for customers to take home loans, car loans and other retail loans.

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Eating and drinking became expensive in July

A report by the State Bank of India has estimated that retail inflation will now come down to four percent only after December. According to the report, the boom in this time is due to breakdown of supply chain due to Covid and heavy purchase made by the government. The new version of SBI EcoRAP says that the inflation data based on the consumer price index for August can remain at seven per cent or above.

In July this year, retail inflation was 6.93 per cent as compared to 3.15 per cent in July last year. This rise in inflation is mainly due to increase in the prices of cereals, pulses, vegetables and meat and fish.

CPI across 7 percent in August?

The SBI report said, “We believe that the August rate of inflation will remain at seven per cent or above and if the effect of comparative base is the primary reason, then inflation will probably look below four per cent only after December or thereafter.” .

The report said that the way the transition of Covid-19 is now increasing in rural areas, it is difficult to believe that supply chains will return to normal soon. The report says that in this situation there is a danger of rising inflation.

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Interest rates will not come down before February!

The Reserve Bank of India has been given the responsibility of keeping inflation around two per cent with a two per cent increase. The report also said that in view of the inflation outlook, the policy interest rate is expected to decrease further in the current financial year. Even if rates were cut, it could be as much as 0.25 per cent. A decision on this can be taken in the February meeting. The figures of inflation with the Monetary Policy Committee in February will be till December only.

The RBI currently has a repo rate of 4 percent and a reverse repo rate of 3.35 percent. At the same time, the bank has maintained CRR at 3 percent and SLR at 18 percent.


Source: www.financialexpress.com

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