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29Th Aug 2016
Reserve Bank of Governor (RBI) Raghuram Rajan
on Monday ruled out any further interest rate cuts till such time the inflation
came down to the comfort zone, and once again asked commercial banks to lower
the cost of credit to their customers. The
Total Investment & Insurance Solutions
"Inflation projections are still at the
upper limits of RBI's inflation objective," Rajan said in his last
Governor's Foreword to Annual Report released here, referring to the
government-mandated level of 4 per cent annual retail inflation, plus or minus
2 percentage points. The Total
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"With the Reserve Bank needing to
balance savers' desire for positive real interest rates with corporate
investors' and retail borrowers' need for low nominal borrowing rates, the room
to cut policy rates can emerge only if inflation is projected to fall
further," he said.
In any case, the task of taking a call on the
interest rates is to be handed over to a new Monetary Policy Committee, that
will comprise three representatives from the central bank -- including the RBI
Governor as its chair -- and three others to be chosen by the government.
Rajan also said the willingness of commercial
banks to cut lending rates was muted, since the level of corporate investment
had reduced the volume and scope of new profitable loans for banks. The
stressed assets of the lenders was also preventing them from taking fresh
exposures freely.
As regards growth, he said, while the economy
was showing signs of picking up, it was still below the levels that the country
was capable of. The Total Investment
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"The key weakness is in investment, with
private corporate investment subdued because of low capacity utilisation, and
public investment slow in rolling out in some sectors," said Rajan, who is
scheduled to demit office on September 4 and hand over the reins to Deputy
Governor Urjit Patel.The Total
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