No change in RBI interest rates disappoints borrowers

Decision influenced by current price situation, high inflation might have weighed RBI’s decision making process, says FM


Geetanjali Minhas | June 18, 2012

Considering rising inflation and global economic uncertainty, in its mid-quarterly policy review on Monday, the reserve bank of India kept policy rates unchanged. The Cash Reserve Ratio (CRR) has also been kept unchanged at 4.75%.

The apex bank gave priority to checking inflation over growth, disappointing India Inc and retail borrowers who were expecting at least 0.25 percent rate cut. The RBI said, "reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressure".

The Wholesale Price Index-based inflation had risen from 7.23% in April to 7.55% in May. Besides, retail inflation also moved up to 10.36% in May, from 10.32% in the previous month.

The RBI said the future action would depend upon on external factors, domestic developments and inflationary risks.

The bank’s action, according to finance minister Pranab Mukherjee, was influenced by the current price situation. "(High inflation)...might have weighed their (RBI's) decision making process...normally in mid-quarter review, it is not necessary for the governor to consult the minister," he said in New Delhi after the policy announcement.

Mukherjee had said on Saturday that he was expecting the RBI to "adjust" the monetary policy to fuel growth. “I am very confident that the RBI would adjust the monetary policy as we are adjusting the fiscal policy to counter slow growth, high fiscal, current account deficits, rising inflation and a slew of negative sentiments facing the economy," Mukherjee had said while delivering the inaugural address at a national seminar on banking, insurance and financial sector organised by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) in Mumbai on Saturday.

The minister had said that like other countries, India, too, is concerned on developments in Greece with reference to challenges it is facing on being part of the currency union as the developments are also impacting value of rupee which has lost against dollar by about 20 percent in the past one year.

On concerns of rising fiscal deficit, the FM responded that the "government is taking steps and we know that if federal finances become weak,  nobody will be able to bail out Indian economy”.

Reacting to global rating agency Standard & Poor’s warning that India’s credit rating may be downgraded to below investment grade, Mukherjee said that “as finance minister, I cannot ignore ground reality and apprehensions of Indian industry and the credit rating agencies” and added that “we have requested all the parties to lend their support and we do look forward to taking everyone on the board”.



Other News

2020 is crucial for CPSE: Arjun Ram Meghwal

"The year 2020 is going to be a significant year for India and especially for Central Public Sector Enterprises (CPSE), "said the Arjun Ram Meghwal, Minister of State for heavy industries and public enterprises on Wednesday at the 7th PSU Awards and Conference organised by Governance Now on 19th

Vice President springs surprise, speaks in 22 languages

Highlighting the importance of preserving, protecting and promoting Indian languages, the vice president of India, Shri M Venkaiah Naidu spoke in 22 languages at an event to mark International Mother Language Day in New Delhi. He urged all the citizens to take a pledge to promote mother tongue and also lea

Title Insurance: new product for old issues

Real estate is among the priciest investments around. More so for the common man who has to live with the burden of monthly EMIs. Yet, it is an art to discover the real owner of any property. Government and revenue records, which are easily accessible to the public, are not properly maintained. Individual

Aadhaar linkage with electoral roll on cards

The election commission of India (ECI) has been working on a series of electoral reforms, and the agenda includes linking Aadhaar with the electoral roll, considering paid news and false affidavit as electoral offence/corrupt practice, better monitoring the role of print media and social media intermediari

Save Panje wetland, give it Ramsar status: environmentalists

To protect the fast depleting wetlands against being used as landfill and for development activities in Mumbai metropolitan region (MMR), environmentalists have asked the centre to declare the 289-hectare Panje wetlands in Uran tehsil of Raigarh district as a ‘Ramsar site’ and preserve its ecol

All you wanted to know about Mumbai’s coastal road

Mumbai is building a coastal road to cut through traffic snarls and make life easier for commuters. The ambitious project, part of the city’s Development Plan (DP) 2035, is the second major initiative after the Bandra-Worli sea link, and should become a reality in 2023. Here are the key facts


Current Issue


CM Nitish’s convoy attacked in Buxar


Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter