RBI wants to reduce inflation to 6-7 percent

August 12th, 2011 - 10:17 pm ICT by IANS  

Kolkata, Aug 12 (IANS) The Reserve Bank of India is looking at bringing down inflation to 6-7 percent in the immediate term, and to between 3-4 percent in the longer term, a top official said here Friday.

“We are looking at reducing inflation to 6-7 percent immediately. Our medium term
projection is 4-5 percent, but in the longer term it should come down to anywhere between 3-4 percent,” RBI’s Deputy Governor K.C. Chakraborty told mediapersons.

He hinted at the probability of another rate hike in September. “Probability of a further rate hike is always there.”

Regarding the micro finance institutions (MFI) bill, Chakraborty said the RBI would be equipped to play the role of regulator in case of the MFIs.

As per the Micro Finance Institutions Development and Regulation Bill 2011, proposed by the union finance ministry, all MFIs would be brought under the regulatory ambit of the RBI which would be the monitoring body for the sector.

“The job has to be done and somebody has to do that. (However), the bill has to be adopted and approved first,” he said.

The RBI official said while high interest rates could lead to higher non-performing assets, such rate hikes are the only factor for an increase in NPAs.

He said the bank’s priority was to maintain low interest rate as high inflation results in an escalation in other costs of the industry.

“If the interest rate is high there is probability that the NPA will go up because his [one who has taken a loan] burden has gone up,” he added at the diamond jubilee celebration of Reserve Bank Employees’ Sports Club here.

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