Admitting that the Reserve Bank of India (RBI) was perhaps justifiably cautious in hiking the reverse repo rate, he said if at all there was any tigntening of liquidity as a result, the government and the RBI would be taking prompt steps, inclduing, if necessary, use of the instrument of Cash Reserve Ratio (CRR).
In the third quarter review of credit policy, the RBI had last week kept the bank rate and CRR unchanged, but hiked repo and reverse repo rate by 0.25% to 5.5% and 6.5%, respectively, as part of measures to rein in inflation. It kept the bank rate unchanged at 6% and CRR at 5%.
The minister said he did not see asset bubbles building up anywhere. Some sectors may be getting more credit than others. In such cases, the RBI would take corrective measures like changing the risk weights of the sectors, he said, citing construction and housing sectors as examples for sectors that might have received robust credit flows. Referring to the inflationary expectaions in view of the high oil prices, he said,oil prices remain a problem.. they continue to cast a shadow on the economy. and there are no signs of things getting any better.