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Money & Banking
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Monetary Policy
`RBI move appropriate'
New Delhi, Oct. 30
The stance taken and the hike in CRR is appropriate in
the current scenario given elevated risk to inflation,
monetary indicators in wake of strong liquidity flows,
high global oil and commodity prices. Currency
appreciation also holds significant risk for exports
competitiveness and hence real economy, says Ms
Shuchita Mehta, Senior Economist, Standard Chartered
Bank:
"As an immediate reaction, banks may hold back cutting
interest rates on deposits/loans. Inflation risks have
increased significantly, even though the headline number
is the lowest in five years. Further monetary action
cannot be ruled out. We remain committed to the view
that RBI will need to tighten reverse repo rate by 25 basis
points in first quarter of 2008." Corporates have now
been allowed to write options and receive premium this is
a significant development especially should the currency
move sharply in one direction. Earlier corporates could
only use zero cost structures. This should help improve
hedging capabilities significantly, she said. - Our Bureau
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