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RBI likely to end its monetary policy stance

RBI likely to end its monetary policy stance
PTI
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First Published: Tue, Sep 09 2008. 11 16 AM IST
Updated: Tue, Sep 09 2008. 11 16 AM IST
Mumbai: With monetary policy to contain double-digit inflation beginning to bear fruit, the new RBI Governor Duvvuri Subbarao may signal softening of stance in the mid-term review of annual monetary policy next month, bankers said on Tuesday.
“The RBI is likely to end its hawkish policy stance when it meets for the mid-term review. A set of facts like falling global crude oil prices are likely to take inflation to 7-8% by April,” State-run Jammu & Kashmir Bank Managing Director and CEO Haseeb A Drabu said.
Bankers also said that the Governor is likely to take more proactive steps to push the banking sector reforms further.
Even if RBI did not lower rates, it would certainly not tighten the monetary policy further in the near future. But the apex bank has a task in hand to bring down inflation to the targeted 7% by March next year, the head of a public-sector bank said.
“We can expect the continuity in the Central Bank’s actions as the policy tools available with the RBI Governor remains the same. However, given the good signals such as slowing inflation and improving fiscal discipline, the apex bank is likely to maintain status-quo in the October review,” the official said.
Many bankers expected more steps from the RBI to further liberalise the banking sector in the country in the ensuing months, especially with regard to norms related to the investment exposure of foreign lenders in domestic banks.
India’s headline inflation shot up to around 13% in the recent past, primarily because of the ‘price shocks’ in international crude oil market, record-high commodity prices and a not-so-good monsoon in the Indian sub-continent.
In a bid to check inflation, the reserve bank hiked its Cash Reserve Ratio, the amount banks are required to park with the central bank, by 1.5% since April.
The RBI also increased its short-term Repo rate, at which it lends to commercial banks, by 1.25% during the period.
Meanwhile, financial services major such as Barclays Wealth and StanChart have given a different view, saying that the Reserve Bank may hike its key-rates by up to another 0.5% to check inflation.
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First Published: Tue, Sep 09 2008. 11 16 AM IST