According to a recent press report, the interest rates are growing higher and higher and the report from the bond market also reveals the direction of the interest rates.
Reports said that banks are not ready to get back the 7 –year and 10 – year government paper. Even though the government borrowings were high but they don’t want to pay more.
The Reserve Bank of India bought the government paper for Rs 4000 crore, but the banks were not ready to buy those papers. The reason behind this is the increase in the interest rates and the government is also not ready to go beyond 8.78 percent of its yield.
The inflation is the primary factor for all these changes, the supply and demand determines the WPI and it is also high. The Fuel and commodity prices are also high.
Reports also said that the supply side was getting weaker day by day, and the monsoons failed in making good yield. The estimated GDP 7 percent range were also going down.
For the past 18 months the RBI taking steps to control the inflation, it increased the policy rates by 350 basis points which has made home loans and other loans more expensive. The bank has not transferred the rates, because the banks are in fear that it may slowdown their lending rate.