Rising prices may prompt RBI action: PM adviser
21 Dec 2009
A continued rise in prices of essentials is likely to invite RBI action to drain the excess money out of the system, and the Reserve Bank of India (RBI) is most likely to raise the cash reserve ratio (CRR) for banks since the interest rate option is too sensitive, reports quoted prime minister's economic adviser as saying.
If prices do not decline in December, the RBI could preferably reduce liquidity by acting on CRR rather than raising interest rate, C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, was quoted as saying.
Meanwhile, the High Level Coordination Committee on Financial Markets (HLCCFM) held its meeting at the Reserve Bank of India (RBI), Mumbai today.
The meeting, chaired by RBI governor D Subbarao, was also attended by finance secretary Ashok Chawla, chief economic advisor at the finance ministry Kaushik Basu, Securities and Exchange Board of India chairman C B Bhave, Insurance Regulatory and Development Authority chairman J Hari Narayan and other senior officials of the finance ministry, RBI and SEBI.
The HLCCFM reviewed the developments in the financial markets, and deliberated, among other things, on issues relating to the credit rating agencies and other inter-regulatory matters.
The HLCCFM is a high level forum for interface among the financial sector regulators.
