Reserve Bank of India (RBI) Governor D Subbarao today said inflation rate is still at unacceptable levels and efforts should be made to rein in prices further to provide relief,especially,to poor people.
“In the last two years,we have been able to bring down the rate of inflation but I admit that inflation is still high and it should further come down.
“Inflation should be brought down to provide relief (especially) to poor (people),” Subbarao said while addressing the gathering at ‘Outreach Programme’ to make people aware of banking services.
Rising prices,he said,had affected one and all and that it was one of the bank’s priorities to contain it.
“Inflation has risen in the last few years – and prices of almost everything have gone up. Inflation has affected everybody but it has affected the poor people most,” he said.
Later talking to media here,Subbarao said he was of the view that Rs 5 per litre diesel price hike would raise inflation rate in the short run.
“In short term,increase in diesel prices might cause inflation… In the long term,it (price hike) is good for economy including for inflation,” Subbarao said.
On a query on plastic notes,Subbarao said the RBI was in the process of importing polymer notes which would be introduced on pilot basis. “We are in the process of negotiating the contract of importing of Rs 10 polymer notes and introduce them on pilot basis. I cannot say how long it will take…but hopefully it will be soon”.
Earlier during his speech,RBI Governor said he had received complaints about shortage of coins and soiled mutilated notes in rural areas and asked the commercial banks to help the RBI in resolving this problem.
The apex bank Governor also raised concerns over the problem of fake currency in the country and asked the police authorities to be vigilant to curb this menace.
“Fake currency is also our problem. Some of anti-social elements are indulging in these fraudulent activities. It is our effort to root out the fake currency from the monetary system,” he said.
Subbarao also termed offering appropriate lending and deposit rates to public as a challenge for commercial banks.
“It is a challenge for banks that depositors should get suitable rate of interest and borrowers should be charged less lending rates. (And) banks should become capable in this regard,” he said.
Subbarao also asked banks to push adequate banking facilities in villages to enable more and more people to avail the same.
On fake RBI letters seeking bank accounts details from people,Subbarao cautioned people against falling prey to such fraudulent practice. “Do not believe in such letters using names of RBI. People who send these letters want to have access to your bank account details and misuse the money from their account holders,” Subbarao said.
Subbarao hopes banks will cut lending rates
Subbarao today expressed hope that banks would lower their lending rate in response to the recent cut in the CRR — the percentage of deposits banks have to keep with the central bank.
“We hope that there will be response from banks and the new rates will go down so that there is credit flow for productive sector,” Subbarao,who was here in connection with an outreach programme,said.
Following the CRR cut by the Reserve Bank of India,the country’s largest bank State Bank of India (SBI) reduced the minimum lending rate by 0.25 per cent last week.
With the reduction,the base rate of the bank came down to 9.75 per cent,the lowest in the banking sector.
It is a challenge for banks to keep the lending rates low,Subbarao said.
Last week,Reserve Bank reduced CRR by 0.25 per cent but refrained from reducing lending rates in view of high inflation.
The RBI decision released Rs 17,000 crore of primary liquidity into the system.
The liquidity infusion,RBI had said,would ensure adequate flow of credit to productive sectors of the economy.
Following the cut,CRR will come down to 4.5 per cent while the repo rate,at which the central bank lends to the banks,would remain unchanged at 8 per cent.
Asked about government’s recent decisions on FDI,Subbarao “those are very welcome measures,much needed,I believe. It will also get us foreign investment which is very necessary for improving production and economy”.
Earlier this month,the government notified its decisions to allow FDI in multi-brand retail and liberalise foreign investment in aviation and broadcasting sectors.
Under the notification relating to FDI in multi-brand retail,multinational companies can invest up to 51 per cent to open stores in 10 states and UTs which have so far agreed to implement the decision.
The government also operationalised the September 14 Cabinet decisions allow 49 per cent FDI by foreign airlines in the domestic carriers and relaxed sourcing norms for foreign retailers investing beyond 51 per cent in single-brand retail.
In the area of FDI in multi-brand retail,the DIPP said the State Governments and UTs are free to take their own decisions.