M A I N   N E W S

No change in EMIs as RBI puts rates on hold
Governor Rajan pegs growth at 5.5% this fiscal | Says deficient monsoon may push inflation up
Sanjeev Sharma
Tribune News Service

No penalty on savings account balance The RBI has asked banks not to levy penal charges for non-maintenance of minimum balance in ordinary savings bank account and inoperative accounts Instead, they can curtail the services accorded to those accounts until the balance is restored The banks have also been asked to consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty EC okays new bank licences The Election Commission on Monday allowed the RBI to issue licences for setting up new banks. The approval comes after the RBI missed the March-end deadline for issuing the first bank licence in almost a decade. The RBI had approached the commission on March 12 seeking its approval for granting bank lincences.

New Delhi, April 1
Monthly EMIs are likely to remain unchanged with the Reserve Bank of India (RBI) leaving benchmark rates untouched citing fears of inflation and worries about a deficient monsoon this year due to the El Nino effect.

The RBI, in its first bi-monthly monetary policy statement, left the short-term lending rate, or repo rate, unchanged at 8 per cent and the cash reserve ratio static at 4 per cent.

RBI Governor Raghuram Rajan in his policy statement said at the current juncture it was appropriate to hold the policy rate, while allowing the rate increases undertaken during September 2013 through January 2014 to work their way through the economy.

Rajan offered some relief saying more tightening may not be required. “Furthermore, if inflation continues along the intended glide path, further policy tightening in the near term is not anticipated at this juncture,” he said.

Analysts, however, pointed out that a cut in interest rates may not be on the horizon anytime soon given the risks highlighted by the Governor.

The RBI indicated its worry on the sustainability of waning food inflation seen in recent months as vegetable prices are unlikely to soften further.

The other risks include a risk to inflation from a below-normal monsoon due to possible El Nino effects, increase in minimum support prices, rise in other administered prices such as diesel and geo-political developments leading to higher international commodity prices.

The RBI projected a higher economic growth rate of 5.5 per cent in current financial year with easing of supply bottlenecks and implementation of stalled projects.

The central bank announced relief for consumers asking banks not to levy penal charges for non-maintenance of minimum balance in ordinary savings bank account and inoperative accounts. It instead asked banks to curtail the services accorded to those accounts until the balance is restored.

"Banks should also not take undue advantage of customer difficulty or inattention," Rajan said.

This will provide relief to a large number of customers who are unable to actively operate their accounts either owing to multiplicity of accounts, change of residence or other reasons. These days, consumers have more than one bank account. Averse to closing accounts, consumers often carry on with several accounts but may not be able to track them due to several reasons. Rajan said in the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty.