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Interest rates unchanged
For the fourth time in a row, RBI kept key interest rates unchanged on Tuesday, thus maintaining that it will not cut rates unless inflation moderates to expected levels, disappointing the borrowers and the industry.
No relief to borrowers in the festive seasion
Mumbai: For the fourth time in a row, RBI kept key interest rates unchanged on Tuesday, thus maintaining that it will not cut rates unless inflation moderates to expected levels, disappointing the borrowers and the industry.
The short-term lending rate (repo) rate will remain at 8 per cent, and the cash reserve requirement of banks at 4 per cent. The statutory liquidity ratio (SLR) has also been retained at 22 per cent.
RBI Governor Raghuram Rajan hoped that inflation will moderate to acceptable level of 6 per cent by January 2016 and maintained that the GDP growth in the current fiscal will be 5.5 per cent, same as projected earlier.
While the unchanged policy will not result in any relief to borrowers in the festive season, RBI relaxed the 'know your customer' norms by allowing self-certification of documents needed for opening bank accounts.
The central bank is also in the process of modifying the definition of "wilful defaulters" so as to bring the directors of defaulting companies within its ambit and announced setting up of a Central Fraud Registry to check frauds.
In the bi-monthly monetary policy review, Rajan said: "The future policy stance will be influenced by the RBI's projections of inflation relative to the medium term objective of 6 per cent by January 2016, while being contingent on incoming data."
Commenting on the RBI policy, Financial Services Secretary G S Sandhu said the central bank understands the needs of market and would cut interest rate at the right time. Explaining the rationale for status quo policy, Rajan said that although WPI inflation has ebbed to levels consistent with 8 per cent inflation by January 2015, "there are risks from food price shocks as the full effects of the monsoon's passage unfold, and from geo-political developments that could materialise rapidly".
On inflation, Rajan said: "The balance of risks is still to the upside, though somewhat lower than in the last policy statement. This continues to warrant policy preparedness to contain pressures if the risks materialise." He said the fall in crude prices and relative stability in the foreign exchange contains some of the upside risks to inflation.
On growth, Rajan said second and third quarter growth will be lower than the first quarter, but the fourth quarter looks more promising. The RBI projects GDP to grow by 6.3 per cent in 2015-16 fiscal.
Rajan said the final guidelines on small banks and payments banks will be issued by November-end, while the final norms with regard to the changes in the regulatory framework for NBFCs will be introduced by October-end.
