RBI, finance ministry begin talks on monetary policy framework

The Reserve Bank of India (RBI) has started preliminary discussions with the finance ministry on monetary policy framework, which includes targeting consumer price index-based inflation, governor Raghuram Rajan on Sunday said.

Last week, the RBI kept the policy rates unchanged, third time in a row at 8 percent, and set a target to bring down retail inflation to 6 percent by March 2016.

Rajan also said cut in the Statutory Liquidity Ratio (SLR) will not impact government’s borrowing costs as credit demand remains muted.

On Aug. 5, the Reserve Bank of India lowered banks’ minimum bond holding requirements, known as the SLR, by half a percentage point to 22.0 percent to free up more money for lending, effective from Aug. 9.

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Nudging the RBI to cut interestrates to boost growth, Finance Minister Arun Jaitley todaysaid he had already made his mind clear and hoped the centralbank will take decision after taking into account variousfactors.

“I, on the same evening (June 3 and August 5) already issued a clear statement and I think that’s very clear. This an issue that the RBI decides and I am sure they factor in various circumstances,” Jaitley told reporters afteraddressing the Central Board of the Reserve Bank.

After the August 5 RBI’s monetary policy, Jaitley had said inflation was moderating and going forward “the RBI should examine the liquidity situation, inflation and growth in setting policy rates”.

On June credit policy, he had said the government was “concerned with restarting” the investment cycle and movingtowards higher growth and job creation. RBI Governor Raghuram Rajan, who was present at the press meet, said “as of now, we think the policy (to contain retail inflation) is on target. We (RBI’s policy measures) are contingent on the data coming in”.

The policy regime, Jaitley said in his address to RBI board, was being geared to attain higher growth, lower inflation and sustainable external balance in the backdrop of sub-five percent growth in last two ficals.

The RBI Board a statement said reviewed the current economic situation, global and domestic challenges and policy responses.

Agencies