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RBI governor to meet bank chiefs this week

business Updated: Sep 28, 2008 22:21 IST
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Reserve Bank of India (RBI) Governor D Subbarao will meet commercial bank chiefs this week amid piling debris of a global financial crisis and just weeks ahead of the mid-year credit policy review. This would be Subbarao’s first structured meeting with bank chiefs after taking over as the central bank governor earlier this month.

Experts said the meeting will largely discuss price and liquidity management issues ahead of the October 24 review of the monetary and credit policy. RBI has launched a monetary attack on inflation by raising key interest and reserve rates and indicated that price management would take precedence over growth if a trade-off were to be made.

The traces of sub-prime in the Indian banking system and issues related to the broader global financial crisis in wake of the stunning collapse of Lehman Brothers and other Wall Street icons could also come up for discussion during the meeting. Sub-prime, refers to a loan given to a borrower who does not qualify for a regular home loan, because of a poor credit record, low income and no job security.

Analysts believe the government-controlled ownership structure would insulate the country’s banks from falling into a possible tailspin.

Shortly after taking over as RBI governor, Subbarao had said India “will draw from the lessons of global experience of the recent period, and be cognizant of the evolving global situation.”A senior government official said the government and RBI would shortly bring out a report of the committee on financial sector assessment.

A thin slice of hope in the long battle to fight double-digit price rise and easing of interest has also surfaced after inflation rate remained flat at 12.14 per cent, statistically marginal but psychologically crucial to arrest a trend. Adding a dash of optimism was a global dip in benchmark crude that slid by more than $40 a barrel from its record high of $147.27 on July 11.

RBI has hiked the cash reserve ratio (CRR) — the mandatory proportion of money banks have to park with the central bank — 12 times or 4 percentage points since December 2006 to suck out excess liquidity from the system. The repo rate, the benchmark short-term lending rate, has been increased thrice since March 2007. Both CRR and the repo rate now stand at 9 per cent.