Stating that there is adequate supply of notes, RBI Deputy Governor R Gandhi on Wednesday said that people should not try to hoard the new currency. He also said that Rs 4 lakh crore has been supplied in new notes. “The note withdrawal decision was not taken in haste but after detailed discussions. RBI and Central Government’s note printing presses are working at full capacity. We advocate that people should shift to digital payments mode,” he said when asked about the queues outside the ATMs. “There has been no implication of demonetisation on RBI’s balance sheet,” Urjit Patel added.
Taking markets by surprise, RBI Governor Urjit Patel today kept short term lending rate unchanged even as the central bank lowered GDP growth rate to 7.1 per cent and short term disruption in economic activities due to demonetisation. Patel-led 6-member Monetary Policy Committee, which had in its first policy review cut interest rate by 0.25 per cent in October, belied expectations to keep benchmark repo rate unchanged at 6.25 per cent unanimously. In view of disruption in economic activities due to demonetisation, RBI lowered growth forecast from 7.6 per cent to 7.1 per cent for the current fiscal.
RBI on its part has said that there are upside risks to inflation. “The Committee took note of the upturn in the prices of several items that is masked by the easing of inflation on base effects during October,” the statement said. “With the OPEC’s agreement to cut production, crude prices may firm up in the coming months. Global developments, especially as financial markets factor in the future stance of US monetary and fiscal policy, could impart volatility to the exchange rate thereby feeding into inflation,” RBI and MPC said. ” Another disconcerting feature of recent developments is the downward inflexibility in inflation excluding food and fuel which could set a resistance level for future downward movements in the headline,” RBI cautioned. Moreover, volatility in crude prices and the surge in financial market turbulence could put the inflation target for Q4 of 2016-17 at some risk, it adds.