RBI aims to keep interest rates stable, says Chakrabarty

RBI aims to keep interest rates stable, says Chakrabarty
PTI
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First Published: Fri, Jul 17 2009. 03 43 PM IST
Updated: Fri, Jul 17 2009. 03 43 PM IST
Mumbai: Ahead of the quarterly review of its annual monetary policy, the Reserve Bank of India (RBI) on Friday said that it would ensure a benign and stable interest rate regime to safeguard the common man’s interest and ensure adequate liquidity in the system.
“The RBI’s effort is to ensure a benign and stable interest rate regime... it is for ensuring adequate liquidity in the system. We are trying to keep interest rates benign,” RBI deputy governor KC Chakrabarty told reporters here.
In the face of high competition in industry, banks, particularly those in the private sector, will have to lower lending rates in the period ahead, Chakrabarty said on the sidelines of the Skoch BFSI summit being held here.
Individual conditions of banks and the inflationary situation will determine whether banks will cut lending rates, Chakrabarty said, adding that if the cost of funds remains high in the system, banks tend to hike their lending rates.
If banks’ cost of funds goes up, they will increase the (lending) rates ... if they have three times of credit demand and they are unable to mobilise funds, they have to pay high rates on deposits, Chakrabarty said.
On credit growth, the deputy governor said that credit outflow is likely to pick up in the coming quarters as there are signs of recovery in the economy.
The central bank will ensure adequate liquidity in the banking system, he said.
As part of the ongoing efforts to promote financial inclusion in the country, the apex bank plans to introduce new guidelines on the business correspondent (BC) model in the next one month, Chakrabarty said.
“(At present), the BC model is too restrictive. The RBI is examining the BC model to make it more operative. We expect to come out with our guidelines in the next one month,” Chakrabarty said.
The Reserve Bank is scheduled to announce the quarterly review of its annual monetary policy on 28 July.
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First Published: Fri, Jul 17 2009. 03 43 PM IST