Chanda Kochhar sides with RBI on rate hike

Earlier in the day,the Reserve Bank had hiked its repo rate by 0.50 per cent to 7.25 per cent besides increasing the interest rate on savings account deposits to four per cent from the earlier 3.5 per cent.

While the RBI’s policy stance could result in interest rates rising,it would help maintain financial stability,she said.

“While it signals an upward movement in interest rates in line with the immediate priority of containing inflation,it will maintain financial stability that will provide a basis for sustainable growth over the long term,” the ICICI Bank chief said.

The RBI has indicated inflation for March 2012 at six per cent,with elevated levels in the first half of the year while GDP growth has been projected to moderate during fiscal 2012 to around eight per cent.

This (8 per cent GDP growth) is still a healthy level of growth that would place India among the fastest growing economies in the world,Kochhar said.

“The move towards a single independent policy rate,which would be the repo rate,is a welcome step and will improve the transmission mechanism of RBI’s monetary policy stance,” she said.

The apex bank has ensured that liquidity in the system remains in balance and maintained within the prescribed range by leaving the cash reserve ratio and the statutory liquidity ratio unchanged,she said.

On the higher provisioning prescribed for certain categories of assets,Kochhar said that this is intended to improve the resilience of the banks’ balance-sheets.