Reserve Bank Governor Raghuram Rajan on Tuesday called on Prime Minister Manmohan Singh and met Finance Minister P Chidambaram ahead of his maiden monetary policy review, which is scheduled for September 20.
“RBI has constant consultations with the Finance Ministry. This meeting was part of that. We discussed the whole gambit of issues,” Rajan told reporters after the meeting.
Sources said during his meeting with the Prime Minister, the RBI chief discussed the state of the economy and steps required to address the current slowdown and high inflation.
In the last monetary policy review announced on July 29, RBI had left all key interest rates unchanged because of a depreciating rupee.
In what will be Rajan’s first monetary policy review, all eyes are on the policy announcement considering the inflation climbing to six months high of 6.1% in August, concerns on falling rupee and slowing growth.
Rajan’s predecessor had all along maintained that rate cuts would be made only when inflation is within the RBI’s comfort level of 5%.
Meanwhile a clutch of bank chiefs have asked for a rate cut to allow liquidity in the market. “We have recommended a cut CRR, repo rate and asked RBI not to restrict the MSF to a particular number. Whatever excess SLR banks hold that should be available for MSF (marginal standing facility),” State Bank of India Chairman Pratip Chaudhuri said.
Keeping the festival season in view banks are keen that RBI cuts bank rates, especially the cash reserve ratio or CRR to improve the demand for manufactured goods. Manufacturing sector has been the worst affected since the economic slow-down and has been showing negative growth because of tapering off demand.
Indian Overseas Bank Chairman and Managing Director M Narendra said: “It is our wish that RBI reversed the liquidity tightening measure taken recently so that loan becomes cheaper.”