RBI for stable interest rate and easy liquidity

NEW DELHI, JUNE 12. Concerned over the industrial slowdown, the Governor of the Reserve Bank of India, Dr. Bimal Jalan, today said it would continue with "rate easing bias" to ensure easy liquidity conditions to improve credit growth.

"We have softened interest rates... The rate easing bias will continue," Dr. Jalan told reporters after a high-power committee meeting here.

"Credit offtake is poor. We are concerned over the downturn in industry. We would like industrial recovery to take place," he said.

Till now, he said, "market conditions in terms of liquidity and credit availability are okay." He reiterated the central bank's stance saying "we have preference for keeping interest rate stable and easy liquidity conditions."

Early in the day, the Finance Secretary, Mr. Ajit Kumar, met chairmen of financial institutions and banks to discuss ways of reversing the economic slowdown by spurring investment and demand.

The bankers wanted the Government to take immediate action to boost public investment that has fallen due to strict expenditure controls impeding major projects in the infrastructure that is capable of spurring demand and growth.

Dr. Jalan said, "The RBI would like liquidity conditions to be easy and the interest rate environment to be positive." He was non-committal on interest rates cut in the coming months to bring down the cost of borrowing.

The RBI slashed the Bank Rate, the interest rate at which banks obtain refinance from the central bank, in two tranches to 7 per cent at the end of fiscal 2000-01. Dr. Jalan had also announced "preference" for lower interest rates in the last monetary policy.

"If conditions required, the central bank would take adequate measures to ensure easy liquidity to the needy sectors," he said.

The statement comes in the wake of the ongoing slowdown in the economy, especially with the index of industrial production growing by a mere 2.7 per cent in April. "the credit offtake is poor. We are concerned over the downturn in industry. We would like industrial recovery to take place," he said.

If liquidity conditions require," we are prepared" to take adequate steps to inject additional liquidity in the system.

Although Dr. Jalan did not hide his concern for industrial slowdown, he expressed optimism over a 6-6.5 per cent GDP growth this fiscal backed by better industrial and agriculture output.

"Reports are that the monsoons are reasonably good till now," he said hoping that it would ensure higher growth in agriculture.

- PTI

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