Transmission of rates is the key for banks: ASSOCHAM

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RBI

By choosing to retain the benchmark policy interest rate at 6.5 per cent, the RBI has not given any surprise to the industry since the central bank wants to wait and see the impact of Monsoon along with certain global factors such as rising commodity prices on inflation, ASSOCHAM President Mr Sunil Kanoria said.

Mr Kanoria said what is equally important is the health of the public sector banks  towards which RBI Governor Dr Raghuram Rajan has alluded to . Besides, the policy statement rightly emphasizes on the transmission of the lending rates by the banks by a slew of measures unveiled in earlier policies, including the dynamic MCLR and better liquidity management.

The ASSOCHAM President complimented Governor Dr Rajan in keeping a close watch on the global risks and a constant eye on the unfolding liquidity situation with regard to the dollar supply. He has sought to address concerns over the impending redemption of FCNR deposits, some of which may not renewed. The fact that the RBI is preparing a contingency plan is laudable since maintaining stability in the foreign exchange market is important.

Mr Kanoria said while the interest rate expectations are generally from the RBI, a tight inflation targeting done through an institutional mechanism by the Finance Ministry should be done away with. After all, when the RBI has been mandated to target inflation of 5 per cent (CPI) by March, 2017, it is bound to be biased towards achieving that target.

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