CRR hike won’t impact interest rates, industry: Finance Secretary

January 29, 2010 06:34 pm | Updated December 15, 2016 11:08 pm IST - New Delhi

A file photo of Finance Secretary Ashok Chawla. Photo: V. Sudershan

A file photo of Finance Secretary Ashok Chawla. Photo: V. Sudershan

Finance Secretary Ashok Chawla on Friday said, the RBI’s review policy has taken a balanced view of the current situation and the CRR hike would not have any affect either on interest rates or the industrial recovery.

“In our assessment, the Reserve Bank has taken a very balanced view of the situation,” Chawla told reporters after the RBI raised Cash Reserve Ratio by (CRR) 75 basis points.

The central bank hiked the CRR, the money banks need to park with the RBI, to 5.75 per cent from 5 per cent today in view of the rising prices.

“The CRR hike of 75 basis points is, in our view, appropriate and adequate because it would only impact the excess liquidity which is in the system,” he said.

The RBI’s not taking any other step on the policy rates at this stage clearly indicates that it intends to proceed in a calibrated manner in handling the recovery, he said.

The RBI has retained repo (short-term lending) and reverse repo (short-term borrowing) rates, which have a direct bearing on interest rates, at 4.75 and 3.25 per cent respectively.

“The bankers have been saying that they don’t see the possibility of any rate hike at this stage,” Chawla replied to a query on whether banks are likely to raise lending rates.

He said RBI has rightly acknowledged that managing the recovery is as important as managing the crisis was, and that the apex bank’s action would not impact industrial recovery.

“RBI has used only the CRR. They haven’t used any other instruments of monetary policy. So, I don’t think there is any need to over react to that,” he said on industrial recovery.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.