Red flags from RBI policy: Inflation, fiscal slippage

It is obvious RBI is unhappy not only with fiscal slippage but also with the potential of further slippages via higher MSPs

On the face of it, the six-member monetary policy committee of the Reserve Bank of India (RBI) did what most observers expected it to do — defer a policy rate increase. The markets responded accordingly, barely moving after the policy was announced. A few banking stocks were affected, possibly because the RBI also announced its decision to “harmonise” the methodology for determining benchmark rates by linking the base rate to the marginal cost of funds-based lending rate (MCLR). While the move is aimed at improving monetary policy transmission, it might affect bank margins at a time when base rates are