Reserve Bank of India governor D Subbarao on Thursday said that India's central bank needs to control inflationary expectations and support growth.
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.
The panel shortlisted bank chairmen who have headed an entity for at least two years and were less than 60 years of age when the vacancy arose. The list will now be narrowed down to three candidates who will be recommended to the appointments committee of the cabinet headed by Prime Minister Manmohan Singh. Their consent will be sought before sending the list to the ACC.
Conceding that there has been risk aversion among the lenders stemming from their rising asset quality concerns, the Governor said banks should lend to productive sectors, notwithstanding the importance of asset quality, by being discerning.
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.
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.
Subbarao's annual statement will be of unusual interest this year
The meeting comes days after the finance minister told Parliament that he would discuss the possibility of further fiscal and monetary measures to revive economic growth, which is projected to fall to 7.1 per cent this year, as against 9 per cent or more in the last three years. The Central Statistical Organisation is due to release the third-quarter gross domestic product estimates by the end of the week. RBI is expected to announce more measures after the data is released.
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.
"Now I get credit for the idea which actually I neither invented nor actually believed in," he said.
Principal Advisor in the Planning Commission and former Chief Statistician of India Pronab Sen did not share RBI's views.
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.
High current account deficit is leading to the rupee weakening.
Angry Congress members staged a walkout during Modi's address.
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.
Reddy has worked to reform the economy.
Reserve Bank Governor D Subbarao on Tuesday favoured bifurcation of the posts of chairman and managing director in state-run banks, saying the experience of such a split in the private sector has been satisfactory.
As GDP growth falls below the new normal, rate cuts seem inevitable.
YES Bank raises base rate; HDFC Bank, Axis hike deposit rates.
The rupee is being driven into a vicious circle.
Reserve Bank on Tuesday raised key interest rates by 25 basis points, its 13th such hike since March, 2010.
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.
Never one to mince words, Rajan will walk away with a mixed legacy
Reserve Bank Governor D Subbaro on Tuesday said there is scope for banks to lower lending rates further, but most top bankers maintained that interest rates will remain the same in the near term and could even rise after 3-4 months.
There is not much that the RBI can do to address India's inflation. Solutions to the problem lie with Pranab Mukherjee and Sharad Pawar, who run the ministries of finance and agriculture, respectively.
The rupee has declined by about 9 per cent in the past three months and had touched an all time low of 61.21 to a dollar earlier this week.
Draft norms soon, but central bank worried about self-dealing by company promoters.
Hawkish tone likely to guard rupee from further slide
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".
Our economic climate since the spring of 2007, when foodgrain prices started their journey northwards, has created an imbalance in market power between buyers and sellers, to the great disadvantage of the former.
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.
Economists say RBI to raise policy rates in annual policy statement in April.
Experts point to the bitter experience of countries including Mexico, Thailand, South Korea and Russia and desist from going forward with plans of issuance of such securities. They say rather than going abroad, the country should increase participation of foreign investor in the government securities which does not have any forex risk.
Market participants are impressed that Rajan has set the ball rolling on his first day at RBI with a series of announcements, raising expectations that more are in store.
RBI Governor D Subbarao aims to revive growth by increasing the flow of credit through reduction in policy rates. By reducing the repo rate by another 25 basis points, he is hinting at a further reduction in interest rates. And, through the 25 bps cut in reverse repo rate, he is trying to make it less remunerative for banks to park surplus liquidity with the central bank and instead prodding them to lend more to the productive sectors.
RBI is also considering a proposal to re-introduce inflation-indexed bonds.
The move will to a large extent speed up the monetary transmission process--which is banks passing on the rate cuts that the Reserve Bank announces to their borrowers without much delays--something that has been missing all these while and something that the RBI has been unhappy with.
The government and the RBI are working together to tackle the country's economic problems but there is no "magic wand" to fix them, said Raghuram Rajan, who will take over as central bank governor next month.
Reserve Bank of India Governor D Subbarao on Friday said he cannot speculate on when he will start cutting policy rates, but assured that the central bank will ensure that there is enough liquidity in the system by conducting open market operations.
Are we adopting an idea whose time has come and gone? My feeling is, yes, says ex-banker C Joseph Chacko in the fourth article of the series on inflation targeting.
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