RBI Guv Raghuram Rajan says current policy rate appropriately set

Reuters Posted online: Tuesday, Apr 01, 2014 at 0000 hrs
Governor Raghuram Rajan says Reserve Bank of India (RBI) should not be in the business of bailing out banks by infusing cash to make up for year-end distortions and the current policy rate has been appropriately set, the central bank chief said post the policy review on Tuesday.

Also Check: Macroeconomic and Monetary Developments 2014 (An Update)

"If we actually had second thoughts about the rate, we would have moved the rate. We believe the rate is appropriately set right now given our anticipation of events for the next few months," Raghuram Rajan told reporters at the post policy press briefing.

Raghuram Rajan's full speech

The central bank left its policy interest rate unchanged, as expected, and said it does not expect further near-term policy tightening if headline inflation continues to ease towards the bank's targeted level.

Also see: Monetary policy review: Guv Raghuram Rajan keeps RBI rates unchanged

RBI-HIGHLIGHTS

Following are the highlights of RBI monetary policy review:

* Short-term lending (Repo) rate unchanged at 8 pc.

* Cash reserve ratio (CRR) too unchanged at 4 pc.

* No rate hike if inflation continues to trend lower.

* Economic growth for 2014-15 expected at 5.5 pc.

* CAD expected to come down to 2 pc of GDP in 2014-15.

* Retail inflation expected to be under 6 pc in 2014.

* RBI asks banks not to charge penalty for failure to maintain minimum balance in inoperative account.

* Approval of new bank licences after consulting EC.

* RBI open to banking mergers, provided competition and stability are not compromised.

* Industrial activity continues to be a drag on economy.

* RBI will strive to increase reach of financial services to everyone by using technology and new products.

* Stress on priority sector lending for greater financial access.

* Today's was first bi-monthly monetary policy review, next one scheduled for June 3.