Inflation still too high, RBI chief Subbarao says

PUNE Fri Nov 16, 2012 1:51pm IST

Reserve Bank of India (RBI) Governor Duvvuri Subbarao attends the monetary policy review meeting in Mumbai January 24, 2012. REUTERS/Danish Siddiqui/Files

Reserve Bank of India (RBI) Governor Duvvuri Subbarao attends the monetary policy review meeting in Mumbai January 24, 2012.

Credit: Reuters/Danish Siddiqui/Files

Related Topics

PUNE (Reuters) - India's inflation rate is still high, the RBI governor said on Friday, suggesting that the bank is unlikely to loosen monetary conditions anytime soon to support faltering growth, despite a slight easing in prices last month.

Duvvuri Subbarao's comments come after data on Wednesday showed India's headline inflation rose 7.45 percent in October, unexpectedly dropping to its slowest pace in eight months.

Subbarao has previously said he expects price pressures to ease only in the first part of 2013, and has strongly indicated any cut in interest rates would likely come in January at the earliest.

The inflation data had raised hopes the Reserve Bank of India would consider a December rate cut, but the 10-year bond yield rose 1 basis point to 8.20 percent following Subbarao's comments as investors pared back some of that optimism.

"We're always on high alert, high alert about growth, about inflation certainly," Subbarao told reporters at the sidelines of a conference.

He added inflation at 7.5 percent was "still quite high."

The central bank has faced pressure from the government and industry to bring down the main policy rate from 8 percent, one of the highest in Asia, as the continent's third-largest economy expands at its slowest pace in nearly a decade.

Subbarao also said the central bank is prepared to issue new bank licenses, but only if all the appropriate conditions are put in place, reiterating the RBI's stance on allowing private companies to enter the sector.

The RBI has faced pressure from the government to start laying the groundwork towards issuing new banking licenses, but the central bank has stated it prefers to wait until the Banking Regulation Act is amended.

The amendment would give the central bank supervisory powers over the private companies that would enter the banking sector, but would need to be approved by parliament.

"We've been prepared in the Reserve Bank for launching this process but all the ground work, all the enabling conditions for launching this work have to be fulfilled," Subbarao said.

Finance Minister P. Chidambaram had called on the RBI on Thursday to start finalising guidelines and proceed to receive applications, saying the Banking Act would be amended.

"I have assured the RBI that the banking regulation act will indeed be amended, hopefully in the winter session or in the budget session," Chidambaram said in New Delhi on Thursday.

(Writing by Shamik Paul; Editing by Rafael Nam and Sanjeev Miglani)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Sino-Indian Ties

REUTERS SHOWCASE

India-China Relations

India-China Relations

India and China look to put knotty relations on new footing.  Full Article 

Importing Iron Ore

Importing Iron Ore

As mining curbs bite, India offers market to glut-hit iron ore.  Full Article 

Lower Output

Lower Output

IOC cuts refinery output as rains hit fuel demand - source.  Full Article 

Drug Approval

Drug Approval

Epirus, Ranbaxy win India approval for arthritis drug copy.  Full Article 

Farming and Technology

Farming and Technology

Climate smart farmers get tech savvy to save India's bread basket.  Full Article 

Rajan Speaks

Rajan Speaks

RBI chief Rajan says limiting reliance on foreign debt.  Full Article 

India-Vietnam Ties

India-Vietnam Ties

India tightens Vietnam defence, oil ties ahead of China Xi's visit.  Full Article 

Debt & Equity Deal

Debt & Equity Deal

KKR to lend $175 million to GMR Infrastructure - source.  Full Article 

Preparing for IPO

Preparing for IPO

Alibaba boosts IPO as demand strengthens.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage