Reddy snaps rate hike cycle

The RBI governor says the common man has fears on inflation and it is imperative on the part of the RBI to work towards controlling the price spiral, reports MC Vaijayanthi.

The Reserve Bank of India has time and again spoken about its primary objective of maintaining price stability. But probably for the first time the RBI Governor emphasised that households were the main focus of the central bank. Y V Reddy said the common man had fears on inflation and it was imperative on the part of the RBI to work towards controlling the price spiral.

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“Corporates and financial intermediaries are creations of the system. The people who matter are the households. They have to develop confidence,” he said at a press conference after the credit policy review on Tuesday.

He reiterated RBI's policy of not taking a view on asset prices but explained that the measures taken by the bank earlier, like raising interest rates and statutory reserves, had led to moderation in asset prices.

“We may intensify the supervisory review of the banks–whether their exposure is high to the capital market and real estate,” Reddy said. He also added that action would be taken against those banks that continue to not lower their loan exposure to these segments.