RBI Still Very Accommodative in Monetary Policy: Raghuram Rajan

Reserve Bank Governor Raghuram Rajan held repo rate steady at 6.75 per cent in his monetary policy announcement on Tuesday. The status quo on repo rate comes amid a pick-up in economic growth, the recent uptick in retail inflation and the prospects of a rate hike in the US. Dr Rajan briefed the media on its policy stance.

Here are the highlights:

• RBI to keep a close watch on impact of implementation of pay commission recommendations
• RBI to focus on implementation of rate cuts by banks
• We are accommodative but also vigilant on inflation
• Focussing on rate cut transmission by banks
• To put out new methodology for base rate within this week
• Half the interest rates cut since January being passed through
• Economy in recovery phase but there are some areas of weakness
• Construction sector could see a pick up in the future
• US Fed action not central to our move
• Quantum as well as quality of fiscal consolidation matters
• Hope government can improve quality of fiscal deficit
• Services inflation a source of concern
• We are taking steps to being a much more open economy; on some dimensions we are ahead of China
• Rupee fluctuations have to be managed
• There is room building up for banks to transmit more rate cuts
• Hoping for a clean-up of bank bad loans by March 2017
• There is a particular way to calculate base rates but that should not come in the way of banks passing on rate cuts
• The RBI is not against growth. We need sustainable growth