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Economy is 'taper-ready' after US Fed shaved economic stimulus: RBI

By Faizan Nizami | Last Updated: Monday, December 30, 2013 - 11:31

Zee Media Bureau

New Delhi: The Reserve Bank of India on Monday said that the Indian economy is 'taper-ready' as the US Fed begins cut down on bond purchase from next month.

In its financial stability report released today, the central bank states that risks to the banking system have increased in the past six months.

RBI also said that it sees forthcoming polls as a potential source of economic uncertainty. It futher added that a stable government will be a positive.

"The current account deficit (CAD) could be below 3 percent of GDP this fiscal," Reserve Bank said.

"The economic outlook has improved, but growth is still weak. External position of the economy is manageable as forex reserves are adequate," it said.

It also ruled out any systemic risk generating from the current high level of NPAs (non-performing assets).

The central bank also pegged gross NPAs at 4.6 percent by Sept 2014, says it will improve to 4.4 percent by March 2015.

In a surprise move, the Reserve Bank in its Mid-Quarter Monetary Policy Review in mid-December kept the repo rate, the rate at which the central bank lends money to commercial banks, unchanged at 7.75 percent in its mid-quarter review of monetary policy.

Similarly the reverse repo rate too stays at 6.75 percent, the cash reserve ratio (CRR) at 4 percent and the marginal standing facility (MSF) at 8.75 percent.

The RBI added it would estimate the impact of any decision by the US Federal Reserve to withdraw its monetary stimulus.

"In view of the fact that liquidity is ample in the system, we will definitely be looking at the rates and we will try to see if something needs to be done...May be for the bulk (depositors) we might look at doing something," RBI governor Raghuram Rajan said.

First Published: Monday, December 30, 2013 - 11:31
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