Mumbai, August 20: RBI governor Raghuram Rajan today said the central bank was tracking the monsoon’s progress and global developments to assess their effects on inflation, in an indication that he is not in a hurry to cut interest rates.
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While in the US, Federal Reserve chairman Alan Greenspan failed to act forcefully on the realty bubble when he was in power between 19881 and 2006, even as he spotted an “irrational exuberance” in the realty market, Rajan thinks RBI or any other central bank has a role in spotting such bubbles in the economy.
Bankers say that deposits, which decide its cost of funds and are contracted at higher rates, take time to reprice and hence, it takes time to pass on the benefits to borrowers. “I don’t see that change from payments banks to universal banks”.
Finance Minister Arun Jaitley is stepping up pressure on the RBI to cut charges because the financial system struggles and worth rises sluggish, with some bureaucrats working behind the scenes to argue for a direct cut of as a lot as 50 foundation factors. “Transmission will never be a one is to one correlation with monetary policy rates”, she said.
“Across the globe because of weak demand we have seen significant efforts to depreciate one’s currency”, he said. “If it’s (for) getting competitive advantage through … longer term depreciation it has to be worrisome across the world, partly because you could have tit-for-tat actions”, he added. “That’s a worrisome trend”.
It should be noted that in India, Bitcoin remains the most known of all the cryptocurrencies, but the market of digital currency still is in the nascent stages.
Bhattacharya had asked whether payments banks could lead to a “worry” and eat into the low-priced deposit base for banks as the new banks have the option to accept deposits. Out of these, RBI yesterday granted “in principle” approval for payments bank to 11 entities, including big names like Reliance Industries, Aditya Birla Nuvo and Tech Mahindra, as also Airtel and Vodafone.
Jaitley said banking network is expanding hugely and the health of banks reflects on the challenges for the economy. “In fact, I see them as an add-on”, he said.
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Country’s largest lender State Bank of India on Thursday expressed concerns about giving fresh loans to accounts which have become non performing assets(NPA) and said the banks do not have any incentive by doing so.
