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01-01-2010, 02:03 AM #1
Credit growth likely to be 15-20 percent: RBI deputy governor
The Reserve Bank of India (RBI) hopes that the credit growth will be between 15 to 20 percent during the current financial year and said the hike in interest rates would depend on the situation.
RBI Deputy Governor K.C. Chakrabarty said the central bank would review the interest rates later this month.
"It will be known only Jan 29 when the Governor will announce the quarterly policy," he told reporters on the sidelines of a conference here Thursday.
Chakrabarty, however, did not rule out a review of the interest rate before Jan 29. "Whether the interest rate will be hiked before that date or not depends on the situation," he said.
He remarked that market determines the interest rate. "Saver requires a higher interest rate, borrower requires lower interest rate and the market determines the way," he said.
While pointing out that credit growth was picking up, Chakrabarty said he expected it to be anywhere between 15 to 20 percent during the current financial year
"It is quite reasonable. If the economy is growing at 6 percent, 12 percent credit growth rate is OK and if it is 8 to 9 percent then credit rate should be 17 to 18 percent. Anything below that will be worrisome as there will be lack of availability of credit," he said.
He said the RBI was not worried over 7-8 percent yields on 10-year government bonds. "It is not unconformable or uncommon. Sometimes it goes up and sometimes it comes down," he said
Stating that the RBI was not concerned about rise in food prices, the RBI official said it was only looking into the society's concern. "The problem requires long term solution. The agricultural productivity needs to be improved. The supply situation and the international situation also have to improve."
On the possible impact of the food inflation on other areas, he said the root cause of the problem has to be found. Asked whether the RBI would use monetary policy tools to prevent the impact, Chakrabarty said monetary policy would be effective only if the cause is due to the monetary issues.
On the impact of capital flows on economy, he said Indian economy was capital starved and it has huge investment requirement for achieving 8 to 10 percent growth. "We can't say no to capital flows. If they are affecting us, we have to take measures to restrict the flow. Wherever the capital flows there will be some issues and we need to address them," he said.
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