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HindustanTimes Sat,26 Jul 2014

RBI policy review: Rajan unlikely to surprise

PTI  Mumbai, January 28, 2014
First Published: 09:02 IST(28/1/2014) | Last Updated: 09:05 IST(28/1/2014)

RBI Governor Raghuram Rajan, who surprised the markets with his actions at three policy meets after taking charge, is unlikely to do so again and is widely expected to keep key rates on hold despite a clamour to boost sagging growth amid easing inflationary pressure.

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Various industry polls and analysts are predicting a status quo from the Reserve Bank in the third quarter monetary policy review on Tuesday, with a poll by foreign lender RBS saying over 80% of bankers, insurers and corporates expect no changes in any of the key rates.

Finance Minister P Chidambaram had last week strongly pitched for growth-supporting measures from the central bank. Speaking at the World Economic Forum in Davos, he said the RBI has an equal role to support growth.

SBI Chairperson Arundhati Bhattacharya declined to take a guess, saying, "The RBI will act in the best interests of everyone."

Two other public sector bankers - Canara Bank's RK Dubey and Oriental Bank of Commerce chief SL Bansal, told PTI that they expect the RBI to maintain status quo.

HSBC India country head Naina Lal Kidwai said, "I believe that RBI will keep interest rate unchanged in this policy review. The message to the industry is quite important to make sure that we can get interest rates to at least plateau, if not come down."

Rajan had surprised the markets on each of the past three occasions, increasing lending rates by 0.25% in the September mid-quarter review and also in the October policy when everyone was expecting a cut. He left the rates unchanged at 7.75% in the December mid-quarter review.

Rating agency Icra expects the RBI to retain the repo rate (at which RBI lends to banks) at the current level of 7.75% even though inflation eased in December.

With wholesale inflation cooling to a five-month low of 6.16% in December, there is renewed demand from industry for a reduction in interest rates.

However, an SBI research report said, "RBI may keep rates steady on January 28 and wait for more information, particularly on trajectory of food inflation, before deciding the next course of policy action because core inflation has remained more or less flat in December 2013."

Ahead of the RBI policy meeting, the BSE Sensex closed 426.11 points down at 20,707.45. The rupee slid 44 paise to end at 63.10 versus the US dollar.


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