The Reserve Bank of India (RBI) may not go for softer monetary policy like lowering overall interest rate given the ongoing surge in global crude oil price.

The consistent decline in inflation rate has been giving rise to expectations of possible cut in interest rate in its half-yearly review of credit policy on October 30.

Till recently, inflation had been on a rising spree. This had forced the apex bank to pursue tighter monetary policy thus hardening the overall interest rate. The tighter monetary policy has also made loan costlier for the industry thus hitting the investment sentiment.

Hardening rates

With the hardening of interest rates over the last one and a half years and appreciation of the rupee squeezing profit margins of a range of manufacturing industries and directly affecting most of exporting companies. 

Against this backdrop industry has been urging the RBI to unveil a softer interest rate regime to spur credit growth. But experts opine the apex bank may not go for softer monetary policy as the ongoing surge in global crude oil prices poses serious downward risks to inflation. Global crude oil prices are now inching towards a record high of 90 dollars per barrel.

Besides, the large scale inflow of foreign funds through the Foreign Institutional Institutions (FII) into the economy, which is one or other has spurred the overall money supply, may come in the way of RBI opting for softer monetary policy, experts say.