RBI, bankers to meet on Monday

Top officials of the Reserve Bank of India (RBI) would meet the chiefs of both public as well as private sector banks on Monday to take stock of the business environment before announcement of the first quarter policy review. RBI is scheduled to review the monetary and credit policy on July 26.

In the pre-policy meet, RBI would review factors like the liquidity condition, banks' performance on loan growth and deposit accretion in the first quarter. RBI had raised key policy rates by 25 basis points in the mid-quarter review in June, after which most banks, including State Bank of India, ICICI Bank and HDFC Bank, had raised their respective lending rates.

The Indian Banks' Association would also present its view on further policy actions. At a recent meeting, economists had concluded RBI should continue the rate increase cycle to control inflationary expectations. “Everyone felt RBI should continue to tighten monetary policy to bring down inflationary expectations, though there were differences in opinion on how much more the central bank needed to raise the rates. Some of us felt there could be a further rise of 50 basis points in two policy reviews, before RBI takes a pause,” said an economist who attended the meeting.

RBI had raised policy rates 10 times since March 2010 but inflation continues to stay high. “Inflation is expected to remain in double digits till August, as the impact of recent fuel price rises fully sets in,” said Rupa Rege-Nitsure, economist, Bank of Baroda. The Wholesale Price Index stood at 9.06 per cent in May.

Growth in bank advances has showed signs of a slowdown because of the impact of rising interest rates. As on July 2, bank advances grew 20 per cent, compared with 21 per cent a month ago. On the other hand bank, deposits grew 18.4 per cent as on July 2, compared with a growth of 18.2 per cent a month ago.