Monetary policy: Bankers urge RBI not to hike repo and reverse repo rates

Bankers present in Tuesday's meeting also urged RBI not to raise key rates - repo and reverse repo - on fears that borrowers may not have the appetite to pay higher rates on loans. Some banks also said they have not yet passed on the 25 bps hike in key rates in March to borrowers. The central bank has hiked repo and reverse repo rates eight times in the past one year to tame inflation.

However, some bankers urged RBI to raise key rates to control inflation. India's headline inflation has remained above RBI's comfort level over a year now. The benchmark WPI rose to 8.31% in February from 8.23% in January. The latest weekly data showed food inflation at 9.5% in the week ended March 19, down from 10.05% in the previous week. Economists expect RBI to continue raising rates to keep inflationary expectations under check.

Bankers have also asked RBI to give them time till June to restructure loans to MFIs. The central bank had given time till March 31, to reschedule loans of MFIs, while allowing them to classify it as standard assets. Banks have even told RBI that securitised portfolio sold by MFIs to banks should be allowed to be restructured under the same dispensation.

During the meeting, RBI also raised concerns about steep rise in banks' loan to the real estate sector. Banks' exposure to the sector stood at 107,889 crore in the first 11 months of 2010-11, up 17% YoY. Bankers, however, felt their individual exposure has fallen in the past few months.

Source: EconomicTimes