RBI policy aimed at taming inflation: govt

The government today said the Reserve Bank of India's (RBI) current monetary policy was aimed at moderating inflationary pressure in the economy.

"The RBI's monetary policy stance aims to maintain an interest rate environment that moderates inflation and anchors inflationary expectation," Minister of State for Finance Namo Narain Meena said in written reply to Lok Sabha.

He further said that while the RBI rate hikes had increased the cost of borrowing, they were intended to lower inflation, which would provide relief to the common man.

"On an ongoing basis, government has been providing interest subventions for key sectors of the economy and sections of the society," he said.

Headline inflation stood at 9.44% in June. The RBI has hiked its key policy rates 11 times since March 2010 to curb demand and tame inflation.

The latest hike of 50 basis points was announced by the apex bank in its first quarter review of monetary policy on July 26.

"Taking cues from the tightening of monetary conditions, banks have also been raising their deposit and lending interest rates. Scheduled commercial banks (SCBs) raised their deposit rates in the range of 25-500 basis points between mid-March 2010 and July 30, 2011 across all maturities," Meena said.

He added, "With regard to the lending rates, the base rates of banks, which replaced the erstwhile Benchmark Prime Lending Rate (BPLR) system from July 1, 2010, also increased in the range of 75-325 basis points during July 2010-July 2011."