New Delhi: Reserve Bank of India (RBI) governor Raghuram Rajan on Friday said that easing liquidity through a reduction in the marginal standing facility (MSF) rate was warranted to narrow the burgeoning current account deficit. Maintaining a hawkish stance, however, he said that RBI will do whatever necessary if condition deteriorates. Rajan added that the central bank intends to get a bullet proof national balance sheet though rupee depreciation, oil prices will continue to impact inflation. Rajan, after presenting his maiden policy review, told reporters in a press conference that the pace of inflation will be calibrate to the proportion of growth of economy. MSF hike was necessary to boost growth,
He added.Central bank does worry about growth; intent of policy today is to say cost of funding is too high, Rajan said.He said that the aim of the central bank at this point was to “reduce the strain on corporate and bank balance sheet. A hawkish RBI on Friday unexpectedly raised the policy rate by 0.25 percent as it kept its focus on controlling inflation, which it felt would be above the expected levels in the current fiscal. Raghuram Rajan, however, eased liquidity though a reduction in the marginal standing facility rate, at which banks borrow from the central bank, by 0.75 percent to 9.5 percent. The repo rate or the short term lending rate has been increased by 25 basis points to 7.5 percent from 7.25 percent with immediate effect.
Bureau Report
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