Subbarao overruled advisers to keep rates steady in Oct

Minutes of advisory panel meet show five members suggested a repo rate cut
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First Published: Wed, Nov 21 2012. 07 31 PM IST
RBI governor D. Subbarao has acted against the advice of the majority of the panel on most occasions, minutes show. Photo: Hemant Mishra/Mint
RBI governor D. Subbarao has acted against the advice of the majority of the panel on most occasions, minutes show. Photo: Hemant Mishra/Mint
Updated: Thu, Nov 22 2012. 12 32 AM IST
Mumbai: The Reserve Bank of India (RBI) governor D. Subbarao went against the suggestion of most external members of an advisory panel to keep the key repo rate steady on 30 October, minutes of the quarterly meeting released on Wednesday showed.
Of the six external members of RBI’s technical advisory committee (TAC) on monetary policy who attended the meeting, five suggested a repo rate cut in the second quarter review of the monetary policy.
The committee consists of seven external members, apart from the governor and the deputy governors. The panel’s role is purely advisory, with the governor having the final say in deciding rates.
RBI left interest rates on hold, but cut the cash reserve ratio (CRR) for banks, defying pressure from the government to lower rates for the first time since April. However, it indicated it may ease the policy rate in early 2013.
Of the five members who suggested a repo rate cut, three recommended a reduction by 25 basis points, while the other two suggested a sharper 50 basis points cut.
One of the members who recommended a repo rate cut of 25 basis points also suggested a 25 basis points cut in banks’ CRR, or the share of deposits they have to maintain with the central bank.
One external member felt no change in the monetary policy stance was necessary, and one could not attend the meeting.
“They felt that even though inflation is sticky, there are no demand pressures and there is a need to revive investments,” the minutes said, referring to the external members.
Since February 2011, RBI has been placing the main points of discussions of the TAC meetings in the public domain with a lag of roughly four weeks after the meeting.
The governor has, however, acted against the advice of the majority of the panel on most occasions, minutes showed. Reuters
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First Published: Wed, Nov 21 2012. 07 31 PM IST
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