Finance Minister Pranab Mukherjee sought to soothe the frayed nerves of India's financial regulators by saying the government would not undermine their autonomy. Mukherjee's assurance came a day after Reserve Bank of India Governor D Subbarao went public with his "concerns" over dilution of the central bank's role in dealing with inter-regulatory disputes in the Ordinance issued last month.
In an interview with Business Standard, RBI Governor justifies action against the real estate sector, saying home prices in most metros have crossed pre-crisis levels.
Raghuram Rajan will take over as RBI Governor on September 4 at a time when the country is facing a grave economic crisis.
MFI tactics have even prompted Andhra Pradesh Cabinet to approve an ordinance to rein them in.
The Reserve Bank on Thursday said it is considering the possibility of allowing Islamic financial institutions to function as NBFCs since Islamic banks are not permitted under the present laws.
Subbarao's annual statement will be of unusual interest this year
The RBI Governor says he does not have a specific foreign exchange rate target, which raises concerns that the central bank is unlikely to defend any particular level strongly.
Currently, banks pay up to 9.5 per cent interest on fixed deposits.
RBI said the continuing sluggishness of the global economy led to some moderation in exports growth and invisible receipts, while import growth accelerated due to the strong domestic recovery.
Rajan said that while there were talks about Jan Dhan, it was difficult to target transfers to people through this tool. Jan Dhan, he said, does not really work as advertised.
Reserve Bank of India (RBI) Governor Duvvuri Subbarao said inflation would determine the future policy and the effort would be to manage the balance between growth and inflation.
Reserve Bank of India Governor D Subbarao has said India, being a current account-deficit country, is more vulnerable to sudden reversals in capital flows and short-term overseas portfolio money than nations which have a current account surplus.
Subbarao also warned of attrition in PSBs, saying, "PSBs will lose talent to the private sector."
Asserting that the withdrawal of stimulus is in the best interest of the economy in the current scenario of high inflation, the RBI said that it has started unwinding the emergency measures plugged in during the financial crisis.
The discussion on new banking licences will be posted on the website of the central bank for public comments, RBI governor D Subbarao said while unveiling the monetary policy for 2010-11.
The Reserve Bank on Thursday said the country's wholesale price-based inflation and industrial production data should be improved and employment data availed for effective monetary policy management.
India had registered an economic growth of 6.7 per cent in FY'09 after posting over 9 per cent growth in the three preceding year, because of the global economic crisis.
As the first quarter review of the credit policy approaches, voices from the market are getting louder by the day that 'baby steps' may not be sufficient to fight rising prices.
The second post of deputy governor became vacant after V Leeladhar superannuated a few months ago. Punjab National Bank chairman and managing director K C Chakrabarty is to take over as deputy governor on Monday. Apart from monetary policy, Subbarao will also handle the department of economic analysis and policy, department of statistics and information management.
Ahead of the monetary policy review, RBI governor D Subbarao is expected to meet Prime Minister Manmohan Singh and finance minister Pranab Mukherjee on October 23.
However, since the banking system is facing tight cash conditions due to payment for spectrum for high speed telecom and broadband services and advance tax outgo, some experts are also of the view that RBI would wait for liquidity to ease before going for rate hikes.
The Reserve Bank of India Governor Duvvuri Subbarao's caution that the central bank will intervene if foreign inflows are 'lumpy and volatile' has calmed the rupee a bit. The local currency on Monday closed at 44.41 per dollar, compared to 44.44 per dollar on Friday. The rupee, which has gained about 5.7 per cent since the beginning of September, traded at its five-month high.
With budgetary preparations on in full swing, the Reserve Bank of India on Friday advised the Finance Minister to at least partially roll back the stimulus that was provided to help the industry cope with the financial crisis.
Stating that counter-cyclical measures to combat the impact of the global financial meltdown were important, Subbarao said the government borrowings had gone up 'rapidly and abruptly' hindering transmission of monetary measures to bring about lowering of interest rates.
Subir Gokarn, Executive Director and Chief Economist at Standard & Poor's Asia Pacific, is heading the shortlist of candidates for the Reserve Bank of India Deputy Governor's post. Gokarn is also a Business Standard columnist.
Growth is coming from sectors which are interest rate-sensitive, says D Subbarao.
Rajan's first few measures include swap window facility for banks to lure in NRI funds.
Bankers, who met the Reserve Bank of India Governor D Subbarao on Monday, two weeks before the annual monetary policy scheduled for April 20, said none of them was presently contemplating hike in lending rates given the 'reasonable' liquidity in the system.
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.
Go for short-term debt funds and fixed deposits, delay home or auto loans.
Professional forecasters have added to Reserve Bank of India Governor Duvvurri Subbarao's dilemma on timing the exit from an accommodative monetary policy stance.
"It was a good long meeting with the governor. He met the finance minister. He reviewed the situation. Rest, wait for the policy," finance secretary Ashok Chawla told reporters.
Managing recovery is a bigger challenge than managing crisis, says the Reserve Bank of India governor D Subbarao
The Reserve Bank on Friday said the new UPA government, which is slated present the Budget some time in July, should resist pressure for another stimulus as sustained economic recovery would require fiscal consolidation in medium term.
'Three external members of the first MPC are respected researchers with excellent academic background, but there is no harm in considering academicians with diverse backgrounds such as finance and labour along with economists for this body,' recommends Tamal Bandyopadhyay.
Amid expectations that the Reserve Bank may keep its monetary stance unchanged, the central bank will come out with its second quarter review of the credit policy for the current fiscal on October 27.
The Reserve Bank of India has launched an assault on inflation by increasing the cash reserve ratio (CRR) 75 basis points to 5.75 per cent. While sounding upbeat on economic growth, the central bank has kept the door open for an increase in interest rates even before the annual policy statement in April.
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.
He will be the first bureaucrat to head the central bank in almost five years.
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