 New Delhi: The Reserve Bank of India (RBI) on July 17 stressed on ensuring a stable interest rate regime to support economic growth.
However, Former Reserve Bank of India (RBI) Governor C Ranngarajan said that the huge borrowing plan of the government might push up interest rates.
Besides, the central bank would work to ensure adequate liquidity, said Deputy Governor K.C. Chakrabarty.
Chakrabarty said, “RBI’s stance will be to ensure that rates remain stable and benign. It will depend on market forces and the global market. There are signs of revival in the debt market.”
He added, “Enabling government borrowing when private borrowing is not high should not impact rates. Since private borrowing may not be large in the first half, it may facilitate large public borrowing.”
Speaking about the current trend of subdued credit offtake, he said that RBI would revisit its credit growth estimates in the quarterly monetary policy review of on July 28.
On a year-on-year basis, bank credit grew 15.1 per cent in the first quarter as against 26 per cent a year ago. The central bank has indicated 20 per cent growth in credit for 2009-10, down from its estimate of 24 per cent for 2008-09. However, Chakrabarty said credit demand would pick up in the coming quarters.
He said that it was better to borrow in the remaining half of the financial year when the demand for credit was likely to be low.
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