What's going on?

India held interest rates at the same level as last month, instead of cutting them in light of economic pressure. Some feel that this is not because the Indian central bank doesn�t want to cut rates but instead is illustrating an issue with the process of how rate cutting occurs in India.

What does this mean?

A few of the issues facing banks in India are that they rely heavily on deposits for funding. In India 78% of India�s banks finance themselves with deposits (like your savings deposit) � compared to 50% in the U.S.

Why should I care?

If you live in India, you would want the central bank to cut interest rates, since it is already hard to access a loan in the country. Lowering rates would hopefully spur consumer spending and economic growth. One investment opportunity from this situation would be to invest in the Indian stock market since interest rate cuts generally increase stock markets and economists are predicting two more cuts from the Royal Bank of India later this year.