RBI for the common man !

The RBI left the key policy rates unchanged today in the mid-term monetary policy review of the year.

Interestingly in an interview the SBI chairman Pratip Chaudhuri, CEO & MD ICICI Bank Chanda Kochhar and MD HDFC Bank Aditya Puri were heard saying that they are surprised at the RBI's inaction in towards policy rates. They were all of the view that we are in a declining interest rate trend, but aren't we hearing that since almost a year now.

Pratip Chaudhury

During the interview Aditya Puri candidly admitted that he has stopped guessing about the possible rate cuts in future.

Aditya Puri

Chanda Kocchar

The common man’s concern is that the inflation should be controlled. Though the recent WPI inflation figures show a decline in inflation, thanks to RBI policy action,
but still they are very high, way above the comfort level for any commoner. Hovering at around 7% y-o-y, the inflation is far above comfortable levels for anyone as the salaries aren’t keeping pace. Looking at high inflation, The Reserve Bank of India on Tuesday left the key policy rate unchanged in its mid quarter (December 2012) monetary policy. With this status quo in the policy action, repo rate stood at 8 percent while reverse repo was at 7 percent. Cash reserve ratio (CRR) or the portion of deposits banks keep with the RBI also remained at 4.25 percent.

The WPI inflation in November moderated to 7.24%, but retail inflation remain elevated at 9.90%.

The Indian economy grew by 5.4% in the first half (April-September) of the current fiscal, against 7.3% in the corresponding period last year.

On the other hand the media, which is apt in speculating things, always thinks and talks about the era of declining interest rates. It should be noted that presently all major financial market players are sitting in bond market, in this belief of theirs that they can make a killing once that interest rates start falling. The very same people shouting and scouting for a rate cut.

FICCI President Naina Lal Kidwai said, “With the inflation numbers showing a decline and the global economy still in a difficult situation, industry is crying out for an impetus for investment and growth. Lower interest rates would be oxygen to the sentiment which is beginning to turn positive.”

Inflation affects every person; from the rich to the poor. RBI has a task to cater to needs of the larger mass and not just cater to a privileged few. RBI is doing the right thing by trying to cool off the inflation and help the common man sustain his living. Think!