SME Times is powered by   
Search News
Just in:   • Area under oil, gas exploration in India has jumped 76 pc in last 10 years: Hardeep Puri  • MSMEs hold the key towards becoming a Viksit Bharat  • India must build AI models to solve world challenges: Amitabh Kant  • Water level in TN's Mullaiperiyar dam rises sharply after heavy rain, flood alert issued  • Working on 'Act East' resolve with 'Act Fast' approach: PM Modi on Sikkim's statehood celebrations 
Last updated: 27 Sep, 2014  

RBI.Thmb.jpg RBI key rate hike more than expected

RBI.9.2.jpg
   Top Stories
» MSMEs hold the key towards becoming a Viksit Bharat
» Centre directs e-commerce firms to analyse and remove dark patterns
» Indian stock market opens in green, Sensex above 81,500
» Cabinet okays interest subsidy on farmers' loans for 2025-26
» Restoration of RoDTEP benefits to boost MSMEs, enhance investors’ confidence: Assocham
Bikky Khosla | 27 Jul, 2010
It was no surprise that the Reserve Bank of India (RBI) raised interest rates more aggressively owing to the fact that runaway inflation was above 10 percent for the past five months.

The RBI lifted the repo rate, at which it lends to banks, by 25 basis points to 5.75 percent. This was more or less in line with my expectations. However I had expected a 25 basis point increase in the reverse repo rate, at which it absorbs excess cash from the system, but the apex bank has raised the same by 50 basis points to 4.50 percent.

I feel inflationary pressures and an improving growth condition have made it easy for the RBI to decide on this hike as it was targeting an inflation rate between 5.5 to 6 percent. The Central Bank also noted that the economy will grow by 8.5 percent, up from earlier projection of 8 percent this fiscal, which I think is pretty achievable.

Amid ongoing tight liquidity in the banking system the RBI has left the cash reserve ratio (CRR) for banks at 6.00 percent, which could be a matter of concern for the industry in general and small and medium enterprises (SMEs) in particular (who are always credit starved) because the move would put pressure on banks' interest rates.

With the increase in short-term lending rate and short-term borrowing rate coming into effect immediately, I feel monetary tightening of the RBI may continue with the repo rate going up to 6.5 percent by March 2011. My apprehension comes from the fact that although the RBI is trying to balance between rising inflation and the need to sustain growth, if inflation remains high, we can expect another 25 basis points increase in September when it comes out with its monetary review.
 
Print the Page Add to Favorite
 
Share this on :
 

Please comment on this story:
 
Subject :
Message:
(Maximum 1500 characters)  Characters left 1500
Your name:
 

 
  Customs Exchange Rates
Currency Import Export
US Dollar
84.35
82.60
UK Pound
106.35
102.90
Euro
92.50
89.35
Japanese Yen 55.05 53.40
As on 12 Oct, 2024
  Daily Poll
Do you think Indian businesses will be negatively affected by Trump's America First Policy?
 Yes
 No
 Can't Say
  Commented Stories
 
 
About Us  |   Advertise with Us  
  Useful Links  |   Terms and Conditions  |   Disclaimer  |   Contact Us  
Follow Us : Facebook Twitter