Policymakers say falling rupee could lead to rise in prices of imported items such as edible oil and build up inflationary expectations in the economy.
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.
Said to be considering a 2nd term for RBI deputy governor
The government is in the process of setting up of an independent debt management office, aimed at separating RBI's role as the decider of interest rate in the market, and at the same time being the banker to the government.
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.
High current account deficit is leading to the rupee weakening.
Banks will ask the banking regulator to defer the higher provisioning norms on standard restructured advances.
Officials, however, said one person's thinking might not change the views of the institution.
RBI raised lending rates to commercial banks 2 per cent to 10.25 per cent making loans costlier.
A cut in the CRR will help banks release their funds stuck with the RBI on which they do not get any interest from the regulator.
The loan by the banks to MFIs for on-lending to small borrowers will fall under 'priority sector' category if the RBI guidelines are met.
RBI Governor D Subbarao is expected in the capital on Friday to hold pre-policy consultations with Finance Ministry officials.
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.
As the global economy sways into uncertain territories and domestic prices almost certain to rise, Raghuram Rajan's ideas would have come in handy.
Headline inflation was 8.98 per cent for March, while the food inflation was 8.76 per cent for the week ended April 16.
Expect rate rise pause, amid market expectations to the contrary.
The central board of Reserve Bank of India (RBI) has opposed a government move to have control over the central bank's staff-related matters. The proposal to make staff regulations statutory and bring them under the subordinate regulation of Parliament was discussed at RBI's board meeting in Kolkata last week.
The Reserve Bank of India, in its first-quarter review of monetary policy, kept the benchmark policy rate constant at 8 per cent.
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.
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
There was a near-unanimous view that the time was right for an increase of 50 basis points in policy rates. Some even suggested that the rates be raised by 75 basis points.
Lauding the pro-reforms approach adopted by Reserve Bank of India Governor Raghuram Rajan, industry body Confederation of Indian Industry on Thursday expressed the hope that the central bank would shift towards an expansionary monetary policy by cutting interest rates to stimulate growth.
Reserve Bank Governor D Subbarao on Thursday said the next fiscal is going to be more challenging than the current fiscal as the moderation in India's economic growth is likely to be worse than expected earlier.
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.
The drop in headline inflation to a 40-month low of 5.96 per cent for March has increased the possibility of a rate cut by the Reserve Bank at its May 3 annual policy, analysts and rating agencies said.
Describing the annual monetary policy announced by RBI Governor D Subbarao as a progressive one, Ernst & Young India's Ashvin Parekh said, "We have almost reached a point where inflation has become unmanageable and RBI has clearly indicated that bringing down inflation to a comfortable level is its top priority."
India imports 80 percent of its oil, which adds to inflationary pressure.
"Global rebalancing will require deficit economies to save more and consume less, while depending more on external demand relative to domestic demand for sustaining growth. Surplus economies will need to mirror these efforts - save less and spend more, and shift from external to domestic demand," Subbarao said during his intervention in the ongoing Spring meeting of the IMF in Washington.
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.
Go for short-term debt funds and fixed deposits, delay home or auto loans.
US Commerce Secretary Gary Locke's robust meetings in Mumbai, includes a bilateral with the Governor of the RBIndia Dr D Subbarao and senior officials at the Department of Atomic Energy and the Nuclear Power Corporation of India, in addition to speeches to the Federation of the Indian Chambers of Commerce and Industry and the National Association of Software and Service Companies, will also be punctuated with an interaction with the dabbawallahs or tiffin caterers.
Markets opened sharply lower on Tuesday, amid weak Asian cues, on concerns that the liquidity squeeze by the central bank would hurt growth and impact equity inflows.
RBI's policy stance must address concerns over slowing output
The government had last week hiked diesel prices by Rs 5.63 a litre and capped the number of subsidised LPG cylinders to six per family a year.
RBI is scheduled to announce mid-quarter review of monetary policy for 2013-14 on June 17.
The rate cuts are expected to infuse Rs 80,000 crore into the banking system.
The recent fall in commodity prices might not be sufficient to bring down the country's widening current account deficit
High deposit rates may put pressure on teaser home loan rates
Banks can lend credit to telecom companies as part of this process.
Prime Minister Manmohan Singh today reviewed measures taken by the government to ease the liquidity crunch faced by India Inc arising out of the global financial crisis as well as discussed possible measures to help Indian exporters tide over the downturn in key markets like the US and Europe.
© 2026 Rediff.com - Investor Information - Advertise with us - Disclaimer - Privacy Policy - Sitemap - Feedback - About us - Terms of use - Grievances