Oil prices the new worry, says RBI | india | Hindustan Times
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Oil prices the new worry, says RBI

The rise in global crude oil prices is likely to have a significant impact on the Reserve Bank of India’s (RBI’s) balancing act on growth and inflation. HT reports.

india Updated: Feb 21, 2012 21:05 IST
HT Correspondent

The rise in global crude oil prices is likely to have a significant impact on the Reserve Bank of India’s (RBI’s) balancing act on growth and inflation.


“A new risk factor has emerged in the form of higher oil prices,” said Subir Gokarn, deputy governor, RBI. “We have to see how persistent that is, how long that particular pressure lasts.”

Brent crude futures hit near $120 a barrel on Tuesday as the euro zone approved a second bailout package for debt-laden Greece, while a cut in Chinese and European imports of Iranian oil supported prices.

India imports more than 80 of its oil requirements and any increase in oil prices affects domestic inflation. Domestic inflation eased to a 26-month low of 6.55% in January.

Moreover, the RBI may again cut the cash reserve ratio (CRR) — the proportion of deposits banks have to park with the RBI — if liquidity conditions remain tight.

“To the extent an opportunity for CRR cut is available, we will also consider that,” he said.

The RBI had cut the CRR by 0.50 percentage points in itsJanuary 24 policy review to 5.50%, pumping in about R32,000 crore into the system. The mid-quarter review of the monetary policy is scheduled for March 15.