CRR hike won't impact interest rates, industry: Fin Secy

Finance Secretary Ashok Chawla today said the Reserve Bank of India's (RBI) review policy has taken a balanced view of the current situation and the CRR hike would not have any affect either on interest rates or the industrial recovery.

"In our assessment, the Reserve Bank has taken a very balanced view of the situation," Chawla told reporters after the RBI raised Cash Reserve Ratio by (CRR) 75 basis points.

The central bank hiked the CRR, the money banks need to park with the RBI, to 5.75 per cent from 5 per cent today in view of the rising prices.

"The CRR hike of 75 basis points is, in our view, appropriate and adequate because it would only impact the excess liquidity which is in the system," he said.

The RBI's not taking any other step on the policy rates at this stage clearly indicates that it intends to proceed in a calibrated manner in handling the recovery, he said.

The RBI has retained repo (short-term lending) and reverse repo (short-term borrowing) rates, which have a direct bearing on interest rates, at 4.75 and 3.25 per cent, respectively.

"The bankers have been saying that they don't see the possibility of any rate hike at this stage," Chawla replied to a query on whether banks are likely to raise lending rates.

He said RBI has rightly acknowledged that managing the recovery is as important as managing the crisis was, and that the apex bank's action would not impact industrial recovery.

"RBI has used only the CRR. They haven't used any other instruments of monetary policy. So, I don't think there is any need to over react to that," he said on industrial recovery.