RBI keeps key policy rates unchanged; expresses concern over 6% inflation target by 2016
Updated: Sep 30, 2014 12:03:22pm
Mumbai, Sept 30 (KNN) Much to the discomfort of the industry, the Reserve Bank has kept the key policy rates unchanged, and expressed concerns about risks to its target to bring consumer inflation down to 6 per cent by January 2016.
RBI today in its fourth bimonthly monetary policy review, decided to keep the lending rate, or the Repo rate, unchanged at 8 per cent, while it retained the short-term borrowing or reverse repo rate at 7 per cent and the cash reserve ratio (CRR) at 4 per cent.
“Domestic activity appears to have come off somewhat after the stronger-than-expected upturn in Q1 of 2014-15. In Q2, the growth of industrial production slumped in July, as capital goods production followed consumer durables into contraction. Exports cushioned the fall in manufacturing output, with the Reserve Bank’s industrial outlook survey indicating expansion in export orders,” said RBI.
Rainfall from the south west monsoon, now expected to be about 12 per cent deficient, will weigh on the kharif crop, mainly due to its uneven spatial distribution. This has resulted in drought-like conditions in some major production zones in the north-west region but also floods in the northern and eastern regions.
“In the services sector, constituents are moving at varying speeds and the purchasing managers’ index points to uncertainty around future prospects. The recent cautious optimism that is building in the economy on the back of improved business sentiment needs to be placed on solid foundations through a step-up in investment. In this context, the resumption of stalled projects should provide a boost to inventory and capex cycles, while reducing distressed bank loans and revitalising growth,” it added.
There is a need for banks to complete KYC for all customers including long standing ‘low risk’ customers. Banks should complete documentation, while minimising the effort on the part of the customer to what is strictly needed. In the event that customers are unable to comply within a reasonable time period, ‘partial freezing’ may be introduced in respect of KYC non-compliant customers i.e., credits would be allowed in such accounts while debits would not be allowed, with an option to the account holder to close the account and take back the money in the account, said RBI. (KNN/SD)
RBI today in its fourth bimonthly monetary policy review, decided to keep the lending rate, or the Repo rate, unchanged at 8 per cent, while it retained the short-term borrowing or reverse repo rate at 7 per cent and the cash reserve ratio (CRR) at 4 per cent.
“Domestic activity appears to have come off somewhat after the stronger-than-expected upturn in Q1 of 2014-15. In Q2, the growth of industrial production slumped in July, as capital goods production followed consumer durables into contraction. Exports cushioned the fall in manufacturing output, with the Reserve Bank’s industrial outlook survey indicating expansion in export orders,” said RBI.
Rainfall from the south west monsoon, now expected to be about 12 per cent deficient, will weigh on the kharif crop, mainly due to its uneven spatial distribution. This has resulted in drought-like conditions in some major production zones in the north-west region but also floods in the northern and eastern regions.
“In the services sector, constituents are moving at varying speeds and the purchasing managers’ index points to uncertainty around future prospects. The recent cautious optimism that is building in the economy on the back of improved business sentiment needs to be placed on solid foundations through a step-up in investment. In this context, the resumption of stalled projects should provide a boost to inventory and capex cycles, while reducing distressed bank loans and revitalising growth,” it added.
There is a need for banks to complete KYC for all customers including long standing ‘low risk’ customers. Banks should complete documentation, while minimising the effort on the part of the customer to what is strictly needed. In the event that customers are unable to comply within a reasonable time period, ‘partial freezing’ may be introduced in respect of KYC non-compliant customers i.e., credits would be allowed in such accounts while debits would not be allowed, with an option to the account holder to close the account and take back the money in the account, said RBI. (KNN/SD)
Loading...
