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-- Geetha Gopakumar

Latest Banking Advice

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Q: what is the impact of rate cut of RBI on inflation.
-- prabhat mishra, Unknown 12/30/08
A: The first issue is RBI's reading of market expectations that it would cut the repo rate. Interest differentials with international rates are already high. With the forward premium being low, investors can be fully hedged and bring money into India. With the RBI already buying up dollars, as it struggles to keep movements in the exchange rate within small bands, anything that puts more pressure on the rupee to get stronger, should logically be countered by the RBI. In this case, an ECB rate cut at a time when the 91 day treasury bill rate had been pushed to below the repo rate, naturally raised


Q: explain the regulation of RBI?
-- RAJASHEKAR, india 12/29/08
A: In India the central bank has straddled the Indian financial system like a Colossus. By and large, it has played a remarkably useful role; even if that role has been more variegated, more demanding, more ‘developmental’ and challenging than the role played by most central banks. Over time, the RBI has proven itself to be one of India’s great public institutions. But the RBI has been made responsible for an incredible array of activities and goals. The impossibility of the RBI trying to hit multiple targets (such as low inflation, a stable nominal exchange rate, a high growth rate, a high flow


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