RBI to focus on bringing inflation down to 4pc

Mumbai, August 27

The Reserve Bank of India (RBI) remains focused on bringing down consumer inflation to its target of four per cent by March 2018, supporting an economy growing below potential, and ensuring banks pass on rate cuts, as per its annual report out today.

After cutting its repo rate by 75 basis points this year, the RBI kept its repo rate on hold at its policy review this month, saying it wanted to monitor inflation and wait for lenders to further lower their lending rates.

In the short-term, the RBI will ‘focus on bringing down inflation in line with the proposed glide path’, as well as working with the government and banks ‘on speeding up the resolution of distressed projects and cleaning up bank balance sheets’, Governor Raghuram Rajan wrote in the report.

The RBI has projected consumer inflation will hit six per cent by January 2016 before gradually easing to four per cent two years later.

To speed up monetary policy transmission by banks the RBI also said it would consider new ways for lenders to price loans, including by measuring marginal costs.

The RBI also said it was considering ways to deepen financial markets, including introducing an electronic platform for corporate bond repos and unveiling a variety of swaps and cross currency futures and options.