RBI monetary policy review meet hikes interest rate: Read full statement by Governor Raghuram G. Rajan

Oct 29 2013, 13:10 IST
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RBI monetary policy review: Interest rate hiked 0.25 pct, Guv Raghuram Rajan makes consumer loans costlier. In pix: Raghuram Rajan and wife Radhika with Arundhati Bhattacharya (right), Chairperson, SBI. PTI RBI monetary policy review: Interest rate hiked 0.25 pct, Guv Raghuram Rajan makes consumer loans costlier. In pix: Raghuram Rajan and wife Radhika with Arundhati Bhattacharya (right), Chairperson, SBI. PTI
SummaryRBI Monetary Policy Review: After Hiking interest rate, Governor Raghuram Rajan wishes India 'Happy Diwali'.

RBI Monetary Policy Review 2013-14: Statement by Governor Raghuram G. Rajan: "Good Morning and welcome to the Reserve Bank.

Today, continuing the process begun in September, we have announced the following policy measures: we have reduced the marginal standing facility (MSF) rate by 25 basis points from 9.0 per cent to 8.75 per cent with immediate effect; we have also increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.5 per cent to 7.75 per cent with immediate effect; and the liquidity provided through term repos of 7-day and 14-day tenor has been increased from 0.25 per cent of net demand and time liabilities (NDTL) of the banking system to 0.5 per cent with immediate effect.

RBI monetary policy review: Interest rate hiked 0.25 pct, Guv Raghuram Rajan makes consumer loans costlier

Assessment

Our policy decisions are based on a detailed assessment of the global and domestic macroeconomic situation. The outlook for global growth has improved modestly and the prospect of delay in the taper of the Federal Reserve’s bond purchases has brought calm to financial markets.

Domestically, while industrial activity has weakened, strengthening export growth, signs of revival in some services along with the expected pick-up in agriculture could increase the real GDP growth from 4.4 per cent in Q1 to a central estimate of 5.0 per cent for the year as a whole. The revival of large stalled projects and the pipeline cleared by the Cabinet Committee on Investment may buoy investment and overall activity towards the close of the year.

Summary: Macroeconomic and Monetary Developments, Second Quarter Review 2013-14

Macroeconomic and Monetary Developments: Read Full Report

On inflation, both wholesale and consumer price inflation are likely to remain elevated in the months ahead, warranting anappropriate policy response.

We have calibrated liquidity management to the system’s requirements. We are providing liquidity through overnight LAF repos, through export credit refinance and through 7-day and 14-day term repos. We have also given greater flexibility in managing reserve requirements. Going forward, however, the more durable strategy for mitigating mismatches between the supply of, and demand for, funds is for banks to step up efforts to mobilise deposits.

On the external sector, a perceptible narrowing of the trade deficit coupled with policy interventions have brought some calm to the foreign exchange market, but normalcy will be restored only when the demand for dollars from

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