RBI wants to both ease liquidity and hike rates
17 Jun 2010
The Reserve Bank of India (RBI) is holding both the carrot and the stick. While the central bank has hinted at a rate hike during its policy review in July to arrest an inflationary spiral, it also seems to be in no hurry to tighten liquidity and roll back the stimulus measures announced in the wake of the slow-down.
Deputy governor KC Chakrabarty today said the RBI is in favour of deregulating savings deposit rates of banks in a bid to give more leeway for banks.
Chakrabarthy's comments follow RBI's decision to release Rs20,000 crore into the banking system hit by liquidity crunch. Banks have lent heavily in the two telecom spectrum auctions of the government that have flushed out of over Rs100,000 crore from the system.
The RBI at the same time also indicated that it might hike policy rates anytime to contain rising inflation. But that does not seem to be an immediate prospect.
A deregulation of savings deposit rates would help market arrive at competitive rates, Chakraborty said on the sidelines of a seminar in Mumbai.
He, however, suggested it is only in the discussion stage and nothing has been decided as yet.
