Repo rate hike on expected lines: Karnataka Bank chief

The Reserve Bank of India’s decision to increase repo rate by 25 basis points in the second quarter review of monetary policy for 2013-14 was very much expected by the market, according to P. Jayarama Bhat, Managing Director of Karnataka Bank Ltd.

Bhat told Business Line on Tuesday that to insulate the economy from fluctuation in prices, the RBI had no other option than increase the policy rates, especially when business and consumer confidence is at a low.

In the monetary policy review, the RBI has also decided to increase the liquidity provided through term repos of 7-day and 14-day tenor from 0.25 per cent of NDTL (net demand and term liabilities) of the banking system to 0.5 per cent, and also to reduce the marginal standing facility (MSF) rate by 25 basis points from 9.0 per cent to 8.75 per cent.

However, the extra liquidity given to the market by way of these two measures will bring down the interest rate in the near term, and will revert the interest rate curve to normal, he said.

vinayak.aj@thehindu.co.in

Source: thehindubusinessline