Gearing up to face a difficult financial year, the Reserve Bank of India on Friday said it will explore all options to maintain comfortable liquidity position, while managing government's borrowing programme in a "least disruptive manner".
Growing fiscal deficit as a result of governments' efforts to prop up their respective economies has the potential to undermine the autonomy of central banks, whose credibility has already been dented due to the financial meltdown, RBI Governor D Subbarao said on Friday.
Reserve Bank of India governor D Subbarao said the rapid expansion of the government borrowing programme was coming in the way of the central bank's monetary policy objective of a lower interest rate regime and called for more independence for the central bank.
High deposit rates may put pressure on teaser home loan rates
To stamp on inflation, RBI raised its key short-term lending and borrowing rates by 0.25 per cent and 0.50 per cent respectively.
The Reserve Bank on Friday said the agriculture growth will be muted this fiscal on account of the impact of poor monsoon on kharif crops.
Reserve Bank of India Governor D Subbarao on Friday increased mandatory cash reserve of banks held by RI by 75 basis points (0.75 per cent) in a bid to suck excess liquidity to combat rising inflation.
Ahead of the first quarterly review of credit policy on Tuesday, RBI Governor D Subbarao on Friday met Prime Minister Manmohan Singh and Finance Minister Pranab Mukherjee to review the macro economic situation.
The full text of RBI governor D Subbarao's last speech, where he blames the UPA government for the fiscal mess
The government is likely to appoint a deputy governor of the RBI by this month end despite disruption in the selection process following the resignation of former Satyam Computer independent director M Rammohan Rao from the selection committee. The government has appointed a Search Committee headed by RBI Governor D Subbarao to shortlist candidates for the post of deputy governor following superannuation of V Leeladhar last month.
The Reserve Bank of India (RBI) on Monday said that the timing and sequence of exit from an easy monetary policy were still a challenge.
The RBI in its monetary policy review in October has revised the inflation forecast to 6.5 per cent by March-end from 5 per cent earlier.
Subbarao pointed out that the non-banking financial companies could also play a significant role in deepening the process of financial inclusion. NBFCs can reach out where banks cannot, he added.
Banks can lend credit to telecom companies as part of this process.
Reserve Bank of India Governor D Subbarao said on Friday that another stimulus package could help the economy in the short-term but a sustainable recovery required the government to return to fiscal consolidation.
"Given the current economic context, and given the policy initiatives of the RBI, there is considerable scope for banks to reduce lending rates," said RBI Governor D Subbarao. He also pointed out that the several fiscal stimulus packages formulated by the government, together with monetary accommodation and counter-cyclical measures announced by the central bank, have started showing revival signs.
This failure of basic short-term policy is surprising, given the star power that this government brings to its economic management.
The Reserve Bank on Tuesday did not rule out taking more action before the next policy review to tackle rising inflation.
The central bank raised statutory liquidity ratio, the portion of deposits that banks are required to keep in government securities, by 100 basis points to 25 per cent. Other key rates were unchanged.
Finance minister Pranab Mukherjee said on Tuesday the Reserve Bank of India's move to keep almost all rates unchanged is line with the discussions he had with the apex bank's governor and the government's thinking on fiscal and monetary policies.
The Reserve Bank of India on Wednesday said banks' response to monetary actions in terms of cutting interest rates have been mute and there is room for further softening of interest rates.
While there are certainly more hawks perched on monetary policy committees of central banks around the world now than a couple of months ago, the doves still have the upper hand.
Financial Services Secretary Arun Ramanathan has been appointed as the Finance Secretary. "The Appointments Committee of the Cabinet has approved the appointment of Arun Ramanathan as Finance Secretary," an official statement said on Tuesday.
After attending a meeting in Mumbai with RBI's top brass headed by Governor D Subbarao, Harsha Pati Singhania, president, FICCI, said the real rate of interest remained in double digits despite inflation having declined sharply. "Given the present interest rate structure and the inflation rate, real rate of interest is still in double-digits. With the near-zero rate of inflation, the real and nominal rates of interest are almost at the same level," said another industrialist.
Raghuram Rajan will take over as RBI Governor on September 4 at a time when the country is facing a grave economic crisis.
Bankers are likely to urge the Reserve Bank not to hike its key-rates and mandatory cash requirement in its April-policy, as they fear that this would affect their liquidity, resulting in a sharp surge in lending rates.
The stress of dealing with the crisis, often with potentially conflicting objectives in front of them, appears to have brought the differences between the finance ministry and the RBI back to the surface.
Faced with the challenging task of balancing growth and inflation, the Reserve Bank of India will take measures in its quarterly review later this month to perk up the economy and to control inflation, which rose to 0.83 per cent for the third week of September.
Economists say RBI to raise policy rates in annual policy statement in April.
The Reserve Bank of India on Friday said it will come out with its annual monetary policy for the next fiscal on April 20, amid expectations that the central bank will hike interest rates to tame the rising inflation
In an attempt to mitigate the problems faced by the beleaguered diamond industry in Gujarat, the Reserve Bank of India has decided to set up a task force comprising representatives of the state government, the State Level Banking Committee Convener and other bankers.The task force will submit its report by the month-end. Gujarat's diamond industry has been beset with problems, chief among them being lacklustre Christmas-season demand for finished diamonds.
Monsoon is this year expected to bring 19 per cent less rainfall than usual, resulting in an equivalent decline in sowing activities.
RBI had made available a potential liquidity of Rs 5.60 lakh crore (Rs 5.6 trillion), nearly 9 per cent of gross domestic product, to help the country tide over the liquidity crisis following the global financial meltdown triggered by the collapse of America's iconic investment banker Lehman Brothers in mid-September.
In the wake of wholesale price-based inflation escalating to 7.31 per cent for the month-ended December and food prices increasing by over 17 per cent, it is expected that RBI will signal tightening of money supply.
The meeting comes ahead of a fresh stimulus package aimed at sectors not covered in the earlier measures announced by the central bank and the government.
A high-level committee on External Commercial Borrowings chaired by Finance Secretary D Subbarao is expected to take a final view on the matter this week. The committee comprises officials of the ministry of finance and the Reserve Bank of India. A high-level committee on External Commercial Borrowings chaired by Finance Secretary D Subbarao is expected to take a final view on the matter this week.
With inflation turning negative, industry has been demanding interest rate cuts to propel demand. However, RBI Governor D Subbarao had said there is no threat of deflation as food and crude oil prices are still firm.
RBI chief banks on 'significant measures' to battle a 'significant crisis'.
Reserve Bank Governor D Subbarao on Friday met Prime Minister Manmohan Singh and is believed to have discussed the state of the economy and initiatives taken by the central bank to arrest the impact of the global financial meltdown on the Indian economy.
The NSE Nifty closes at 5,134, up 22 points. Global markets are trading mixed; European markets are marginally in the green while the US index futures are flat.
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