RBI Governor Rajan Asks Banks to Cut Lending Rates: Highlights

RBI Governor Raghuram Rajan said banks need capital to finance lending.

Here are the highlights of what Dr Rajan said:

• Global crude prices are a risk to inflation


• FY16 GDP growth target cut to 7.6% from 7.8%


• Banks have started passing through some of the past rate cuts


• Volatility in external environment can affect inflation


• Volatility in external environment can affect inflation


• Today’s policy is neither aggressive nor conservative


• It is a “goldilocks” policy


• Mixed signs of recovery in the economy


• Impact of unseasonal rains moderate so far


• Monsoon delay, firming of crude prices are risks to inflation


• Risks to inflation still remain


• If monsoon is better than forecast, there may be more room for rate cuts


• If government contains inflationary impact, there may be room for more rate cuts


• Biggest uncertainty for inflation is outcome of the monsoon


• Global recovery still slow, getting differentiated across regions


• We think the economy is in recovery, but it is still slow


• Government’s response to a poor monsoon is most important factor


• We have done what we could be given the current room


• Monsoon and policy response is biggest factor on RBI’s mind


• Have to be on disinflationary path


• We have “erred” a little towards giving impetus to investment


• Banks have to deal with asset quality issues


• Banks have been sitting on asset quality issues


• We want quick clean-up of balance sheets


• We’re talking to banks on dealing with bad assets


• Have given relaxations on dealing with bad assets


• Banks have to recognise the problem of bad assets


• Message to banks: Deal with asset quality issues now


• Banks need capital to finance lending


• There are some people who want a weaker rupee, there are some people who want a stronger rupee


• The markets will broadly find the appropriate rate for the rupee


• RBI only intervenes to check volatility in the rupee


• We have accounted for food inflation in our forecast


• Food management measures can help reduce inflation- the government is looking into them


• We have plenty of reserves to deal with the impact of US Fed action