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Interest rates need to be reduced: SBI

Last Updated: Tuesday, October 16, 2012 - 23:36

Chandigarh: State Bank of India on Tuesday said it expects RBI to bring down interest rates in the upcoming monetary policy review to boost the industrial activity.

"We want that interest rates should be brought down by RBI (in its upcoming policy) so that business and industrial activity could get uplift which is facing stress at the moment," SBI Manging Director S Viswanathan told reporters in Ludhiana.

He further said if RBI faces technical problem in bringing down interest rates then it can reduce cash reserve ratio so that banks could get more funds for disbursement.

"CRR can be cut down if interest rates are not possible to be reduced because of any technical reason. It will result in more funds for banks for lending," he said.

The RBI is scheduled to unveil its second quarter review of the credit policy on October 30 amidst expectations of cut in the benchmark interest rate.

In its last credit policy review in September, RBI slashed CRR, the portion of deposits to be kept with central bank, by 0.25 percent to infuse Rs 17,000 crore liquidity in the system.

It, however, left the repo rate, at which the central bank lends to the banks, unchanged at 8 percent and the reverse repo, at which it absorbs excess liquidity, at 7 percent.

Viswanathan said that RBI would consider inflation, growth projections among other factors while reviewing the monetary policy on October 30.

As per the latest data released today, inflation in September shot up to 7.81 percent from 7.55 percent in the previous month.

Earlier in the day, RBI Deputy Governor H R Khan said that the monetary and fiscal policy have to move in tandem.

"As we have articulated time and again, it (monetary policy) has to be in tandem with the fiscal policy. It has to be a joint venture. It is not a solo play," Khan said adding that the fiscal deficit is one of the major concerns in the current situation.


First Published: Tuesday, October 16, 2012 - 23:36
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