Business Standard

RBI douses hopes of rate cut in near future

Inflation forecast raised, growth projection cut SLR reduction provides room on retail loan rates

Related News

The Reserve Bank of India (RBI) on Tuesday left its key policy rate unchanged at eight per cent in line with expectations, but its sharp tone on inflation doused all hopes of any monetary easing in the near future as well.

The central bank’s policy dilemma was clear from the statement: it cut its economic growth forecast for the fiscal year to March 2013 and at the same time raised its inflation forecast. While the GDP growth projection for 2012-13 has been lowered to 6.5 per cent from the 7.3 per cent estimated before the onset of the monsoon, the inflation projection for end-March has been increased to seven per cent from six per cent. “In the current circumstances, lowering policy rates will only aggravate inflationary impulses, without necessarily stimulating growth,” Governor said, adding the central bank’s primary focus was inflation control.

The left its at eight per cent and the cash reserve ratio for banks at 4.75 per cent. The CRR is the share of deposits banks must keep with the RBI.



The RBI reduced the banks’ statutory liquidity requirement (SLR) to 23 per cent from 24 per cent, effective August 11. That reduces the portion of deposits banks need to invest in liquid instruments, mainly government bonds, and frees up more funds for banks to lend. The reduction, expected to infuse Rs 60,000 crore liquidity in the system, will enable banks to reduce lending rates in the retail segment.

“There would be a transfer of resources from the SLR to the real sector (private or public). I think this credit (by freeing of SLR) would largely go to retail. To attract customers, there will be a reduction in rates,” State Bank of India Chairman said.

Read more on:   
|
|
|
|
|
|
|
|

RBI douses hopes of rate cut in near future

Inflation forecast raised, growth projection cut SLR reduction provides room on retail loan rates

The Reserve Bank of India (RBI) on Tuesday left its key policy rate unchanged at eight per cent in line with expectations, but its sharp tone on inflation doused all hopes of any monetary easing in the near future as well.

The Reserve Bank of India (RBI) on Tuesday left its key policy rate unchanged at eight per cent in line with expectations, but its sharp tone on inflation doused all hopes of any monetary easing in the near future as well.

The central bank’s policy dilemma was clear from the statement: it cut its economic growth forecast for the fiscal year to March 2013 and at the same time raised its inflation forecast. While the GDP growth projection for 2012-13 has been lowered to 6.5 per cent from the 7.3 per cent estimated before the onset of the monsoon, the inflation projection for end-March has been increased to seven per cent from six per cent. “In the current circumstances, lowering policy rates will only aggravate inflationary impulses, without necessarily stimulating growth,” Governor said, adding the central bank’s primary focus was inflation control.

The left its at eight per cent and the cash reserve ratio for banks at 4.75 per cent. The CRR is the share of deposits banks must keep with the RBI.



The RBI reduced the banks’ statutory liquidity requirement (SLR) to 23 per cent from 24 per cent, effective August 11. That reduces the portion of deposits banks need to invest in liquid instruments, mainly government bonds, and frees up more funds for banks to lend. The reduction, expected to infuse Rs 60,000 crore liquidity in the system, will enable banks to reduce lending rates in the retail segment.

“There would be a transfer of resources from the SLR to the real sector (private or public). I think this credit (by freeing of SLR) would largely go to retail. To attract customers, there will be a reduction in rates,” State Bank of India Chairman said.

image

Read More

RBI sees limited room to ease policy

Duvvuri Subbarao, the head of Reserve Bank of India, said on Saturday there is room for monetary easing but it is limited, and there were upside ...

Recommended for you

Quick Links

More news from Finance Rss icon

Govt banks to stay closed on 2nd and 4th Sat from July

Pay revision details okayed for 2012-17, arrears to be paid from this month; total extra payout to staff will be Rs 8,300 crore a year

ICICI Bank launches voice recognition for customers

MD Chanda Kochhar says the facility 'has the potential to increase security and convenience'

Banks seek 50 bps cut in Cash Reserve Ratio

A 50 bps cut in CRR will release Rs 40,000 cr in the system, which could earn interest income and help in protecting interest margins

Back to Top