RBI credit policy indicates of a rise in interest rates

The new RBI credit policy would raise interest rates. On April 20, 2010, Reserve Bank of India Governor, D. Subbarao, will present the annual monetary policy for FY 2010-2011. Mr. Subbarao already mentioned his plan to raise key interest rates to tackle the inflation. D. Subbarao is planning to increase RBi’s repo and Reverse Repo Rates by about 50 basis points. News Relay.com reports:

The repo rate now stands revised to 5 percent and the reverse repo rate to 3.5 percent.

The repo rate is the interest charged by The Reserve Bank of India (RBI) on borrowings by commercial banks.

It is also time for the apex bank to adopt a neutral policy rather than an accommodative policy as there have been rising consumer demands and recovery in private apex.

It is believed that the new policy would bring in many changes but economists and bankers are giving out different opinions about the credit policy.

Indian inflation is 10% and the economy is growing at a rate of over 7%. According to Jahangir Aziz, Chief Economist, JP Morgan, the primary focus of the RBI’s policy would be how quickly it could bring down the inflation, especially non food inflation.