Raising banks’ cash reserve ratio (CRR) might be one of the tools to be used by the Reserve Bank of India (RBI) to suck out excess liquidity in the banking system, Chairman of Prime Minister’s Economic Advisory Council C Rangarajan today said.
“There are many measures and CRR may be one of the tools they may use,” Rangarajan said. Bank’s CRR is currently at 5 per cent, while Repo Rate and Reverse Repo Rate are at 4.75 per cent and 3.25 per cent, respectively.
He said the central bank may look at price movement during December before taking a final decision on a likely rate action. “They (RBI) will watch price movement in December before taking any action,” he said.
India’s headline inflation rate surged to a 10-month high of 4.78 per cent in November from 1.34 per cent a month earlier. The rise was mainly on account of increase in prices of primary articles and a low base effect.
Taming inflationary pressure is now expected to top the RBI’s agenda, which in the last one year has focussed on stimulating growth by following a benign interest rate regime.
