FinMin expects RBI to maintain soft monetary policy

The finance ministry hopes that the central bank will continue with a soft stance in its monetary policy review on October 27.

Ahead of its monetary policy review, Reserve Bank of India (RBI) Governor D Subbarao is expected to meet Prime Minister Manmohan Singh and Finance Minister Pranab Mukherjee on Friday. “We hope that it (soft monetary policy) will continue,” said Finance Secretary Ashok Chawla on the sidelines of a CII event.

In line with the finance ministry expectations, economists also do not expect any major changes in the RBI’s stance in its upcoming review. However, some expect there may be an increase in the cash reserve ratio (CRR) by January.

At present, CRR stands at 5 per cent, while the repo rate (the rate at which banks borrow from RBI) is at 4.75 per cent and reverse repo (the rate at which RBI borrows money from banks) stands at 3 per cent.

It is largely expected that with the inflation rate turning positive and likely to reach 6 per cent in the beginning of 2010, any tightening of rates would come only next year.

3G auction
The finance secretary also said auctions for the 3G spectrum would take place by December this year. The Department of Telecommunications had earlier said that the auction would start from December 7, though there are apprehensions about the date since the defence forces are yet to vacate spectrum.

The auction has already been postponed several times.

With the availability of 3G spectrum, telecom companies are expected to offer a combined mobile and internet platforms.