Interest rates to remain high; no relief from RBI
Updated: Aug 05, 2014 02:24:16pm
Mumbai, Aug 5 (KNN) Disappointing the industry, the Reserve Bank of India (RBI) today left the policy interest rates, called Repo, unchanged meaning thereby the cost of borrowing will remain high. Small window of extra funds to the banks through SLR relief would not make a difference since the banks prefer to park money with the government rather than lending to the industry.
Repo rate stayed at 8 per cent while the cash reserve ratio (CRR) of scheduled banks was also unchanged at 4.0 per cent of net demand and time liabilities.
The RBI has decided to reduce the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.5 per cent to 22.0 per cent of their NDTL with effect from the fortnight beginning August 9, 2014; and continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system.
"The moderation in CPI headline inflation for two consecutive months, despite the seasonal firming up of prices of fruits and vegetables since March, is due to both base effects and the steady deceleration in CPI inflation excluding food and fuel," RBI Governor Raghuram Rajan said.
“Sentiment on domestic economic activity appears to be reviving, with incoming data suggesting a firming up of industrial growth and exports,” RBI said in a statement.
Leading indicators of the services sector are mixed, although there are early signs of modest strengthening of corporate sales and business flows. While the initial slow progress of the monsoon and its uneven spatial distribution raised serious concerns regarding agricultural production, these have been mitigated, though not entirely dispelled, by the pick-up in the monsoon through much of the country in July, it added.
The implementation of government policy actions that have been announced should create a congenial setting for a steady improvement in domestic demand and supply conditions, RBI said.
In the second bi-monthly monetary policy statement of June 2014, the Reserve Bank reduced the SLR to 22.5 per cent of NDTL in anticipation of recovery in economic activity. (KNN Bureau)
Repo rate stayed at 8 per cent while the cash reserve ratio (CRR) of scheduled banks was also unchanged at 4.0 per cent of net demand and time liabilities.
The RBI has decided to reduce the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.5 per cent to 22.0 per cent of their NDTL with effect from the fortnight beginning August 9, 2014; and continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system.
"The moderation in CPI headline inflation for two consecutive months, despite the seasonal firming up of prices of fruits and vegetables since March, is due to both base effects and the steady deceleration in CPI inflation excluding food and fuel," RBI Governor Raghuram Rajan said.
“Sentiment on domestic economic activity appears to be reviving, with incoming data suggesting a firming up of industrial growth and exports,” RBI said in a statement.
Leading indicators of the services sector are mixed, although there are early signs of modest strengthening of corporate sales and business flows. While the initial slow progress of the monsoon and its uneven spatial distribution raised serious concerns regarding agricultural production, these have been mitigated, though not entirely dispelled, by the pick-up in the monsoon through much of the country in July, it added.
The implementation of government policy actions that have been announced should create a congenial setting for a steady improvement in domestic demand and supply conditions, RBI said.
In the second bi-monthly monetary policy statement of June 2014, the Reserve Bank reduced the SLR to 22.5 per cent of NDTL in anticipation of recovery in economic activity. (KNN Bureau)
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