Letter to BS: RBI hikes repo rate to pre-empt inflationary build-up

This refers to your editorial “Ahead of the curve” (August 2) and the media debate on the monetary policy committee’s (MPC) perceptions. Your analysis about the context of interest rate hike are realistic. The media debate that followed the MPC announcement makes one doubt how many of those responsible for follow-up support read beyond the operational paragraphs in the bimonthly monetary policy statements issued religiously by the Reserve Bank of India (RBI).

The banks have their own way of raising lending rates, irrespective of the real cost of resources or the guidance from the regulator. Since demonetisation days, banks’ dependence on