Tuesday, April 7, 2009

Interbank Lending Rate Falls... again

LIBOR, or the rate that banks charge one another for three month loans, fell once again. Additionally, RBI now wants banks to cut rates even more. Going by regular economic textbooks, there should be no reason as to why lending should not be going on, but this is not a regular economic situation. Something a little deeper, perhaps?

"Interbank lending rates affect the wider economy by determining the costs of loans to households and businesses. They had spiked higher since the start of the financial crisis, and have only been falling gradually as governments and central banks around the world announced a raft of measures to stimulate the global economy and financial sector."

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