Finance minister P Chidamabaram today indicated that the increase in reverse repo rate, announced in the credit policy, will not raise bank lending rates, and allayed fears on inflation by promising steps to ensure price stability. "The assumption you are making that increase in reverse repo by 25 basis points will have an immediate impact on bank lending rate is not correct," he told reporters while reacting to the monetary and credit policy released today. "There is enough liquidity in the market, and therefore lending rate will be benign. There are many cases where lending takes place at sub-PLR rates," he added.On inflation, Chidambaram said: "There cannot be knee-jerk reaction on inflation. The recent movement in inflation is because of base effect. Inflation is under control, but oil continues to be a concern. We will take every step to maintain price stability." On GDP growth projections, the finance minister said, "I am very happy that RBI has concurred with the views of the department of economic affairs." On borrowings, Chidambaram said, "We may not borrow as much as indicated in the budget. Our calculations now show that we may have to borrow less than that. The government was to borrow Rs 10,000 crore in the first week of May. We will restrict our borrowing to Rs 8,000 crore."
