The friction with the political class is not only about interest rates and monetary policy. While the government often spoke freely about its discomfiture, the RBI had to be careful even in its response to the government as any loose statement would affect the markets.
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.
Reserve Bank Governor D Subbarao will, however, not touch the policy rate or the repo, rate at which RBI lends to banks, on October 30 when he unveils the half-yearly monetary policy because headline inflation continues to be elevated at 7-7.5 per cent, the agency said.
These banknotes will bear the signature of RBI Governor D Subbarao and the year of printing 2012 will be on the reverse of the banknote.
Is unhappy about banks' reluctance to pass on lower interest rates.
The Reserve Bank in its Mid-Term Review of Annual Policy Statement for 2008-09, the Reserve Bank has said that inflation continues to be a matter of concern.
'The prime minister's comment on 'revdi culture' was welcome. But I am disappointed he did not follow up on that.' 'All political parties, including the BJP, have been guilty of this.' 'Now, Modi's guarantees, the Congress's 'nyay' path and both ruling and Opposition parties are vying with each other for freebies in my home state Andhra Pradesh.'
The majority votes came at a time when Subbarao had been holding the repo rate in the last four monetary policy reviews.
Due to tight liquidity condition, RBI would cut cash reserve ratio.
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.
According to Subbarao, the lower your reserves dip, the more vulnerable you become.
It's affecting deposits, too.
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 chief also reviewed the high-level of inflation with the Finance Minister, ahead of the quarterly review of monetary policy next week, amidst expectations of another hike in key interest rates.
The central bank, however, would prefer money supply in deficit mode.
Principal Advisor in the Planning Commission and former Chief Statistician of India Pronab Sen did not share RBI's views.
The RBI Governor, however, added it was 'difficult to say when that will take place and in what shape it will roll out'.
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, who was the Finance Secretary from April 2007 to September 2008, is a key witness in the case in which former Telecom Minister A Raja and others are facing trial.
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 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.
Duvvuri Subbarao the new Reserve Bank of India governor said on Tuesday that the central bank will review GDP growth forecast for this fiscal during its October review of monetary policy.
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".
State Bank Chairman Pratip Chaudhuri's call last week for abolishing the mandatory cash reserve ratio had attracted a sharp reaction from RBI Deputy Governor K C Chakrabarty. CRR is the amount of deposits that banks park with the RBI as a prudential measure without earning interest on it.
In a meeting hosted by US India Business Council on Thursday night, the American industry leaders also discussed with Subbarao the need for maintaining 100 per cent foreign ownership of wholly-owned subsidiaries, and transparent priority sector lending norms.
US Federal Reserve Chairman Ben S Bernanke held talks with RBI Governor Duvvuri Subbarao in Mumbai.
Due to a spike in crude oil prices and the govt's high fiscal deficit
New notes bearing signature of former Governor D Subbarao are legal tender and the process of changing signature is underway
With RBI rate cut, loans are likely to be cheaper.
"We did not abuse RBI governors," says Chidambaram.
This was the first meeting between the RBI Governor and Chidambaram following his taking over the charge of the Finance Ministry last week.
Subbarao said in terms of the risk to growth inflation outlook, the first would depend on global recovery and if it fails, could have an impact for India.
Regardless of who is right, Rajan has to quickly come to grips with a number of obvious challenges, ranging from the immediate to the medium term.
With RBI governor Duvvuri Subbarao retiring in September, 2013, the government is on the look out for the most eligible person to head the Reserve Bank of India.
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Subbarao was appointed as the central bank chief on September 5, 2008 for three years and was later given an extension for another two years.
Telecom Minister Kapil Sibal on Thursday contested the claims of former Telecom Secretary Siddhartha Behura over a December, 2007, meeting held regarding entry fees for 2G licences, in which he had said the then Finance Minister P Chidambaram and former Finance Secretary D Subbarao were present.
RBI chief banks on 'significant measures' to battle a 'significant crisis'.
While making it clear he will continue with the strategy followed by RBI so far on inflation and exchange rate management, RBI Governor D Subbarao said, "We will be monitoring the situation closely and continuously, be mindful of implications of our monetary stance on the growth prospects and take action as appropriate." He added, "I am not sure whether we can say inflation is softening consistently, but the decline in the Wholesale Price Index is satisfying."
The Reserve Bank may give up its opposition to the proposal of a monthly compilation and release of inflation data, with D Subbarao moving to the central bank from the finance ministry, which was open to the idea of a shift in the time table of the Wholesale Price Index.
