RBI Governor Shaktikanta Das at 'Kautilya Economic Conclave' in New Delhi on Friday.
Credit: PTI Photo
New Delhi: Global uncertainties like high oil prices due to the latest flare up in the Middle East may force the Reserve Bank of India (RBI) to keep policy interest rates at elevated levels for a longer period, forcing people to pay high interests on home, car and other loans.
RBI Governor Shaktikanta Das on Friday indicated that the cut in interest rates would depend on the evolving global situation.
“Interest rate will remain high, how long they will remain high, I think only time and the way the world is evolving will tell,” Das told reporters.
The RBI has kept key policy rates unchanged since February this year. The monetary policy committee of the RBI earlier this month decided to keep the repo rate, the rate at which the RBI lends money to commercial banks, unchanged at 6.5 per cent.
The repo rate was hiked by 250 basis points between May 2022 and February 2023, leading to a sharp jump in EMIs on home, car and other loans.
“The 250-bps hike is still working through the financial system. We have also appropriately fine-tuned our communication to ensure successful transmission of the rate hikes,” Das said.
Talking to reporters on the sidelines of the Kautilya Economic Conclave 2023, the RBI Governor said the focus of the central bank remains on bringing down CPI-based retail inflation to 4 per cent.
“We are extra vigilant and we stand ready to take whatever action that needs to be taken. We need to see sustained decline in inflation,” he said.
Retail inflation eased to 5.02 per cent in September from 6.83 per cent in the previous month, aided by a steep fall in vegetable prices. “The outlook on food inflation, however, is beset with uncertainties,” the governor said.
Addressing the conclave, Finance Minister Nirmala Sitharaman underlined the need for fiscal prudence and bringing down the country’s debt. “We are conscious of the debt of the Government of India today. Compared to many others it might not be as high as it is. But even there, we are consciously looking at experiments in different parts of the world,” she said.
“We are looking at ways in which we can bring down the overall debt,” the finance minister added.
The finance minister said the global multilateral institutions including the United Nations, the World Trade Organisation (WTO) and the World Health Organisation (WHO) are losing effectiveness.
“Globally, we don’t need to hesitate any longer to say that the multilateral institutions, whether it is the UN, Security Council or the WHO, the WTO are less than effective from where they were made into institutions,” she said.
“Because they have become less effective, what we took for granted is no longer to be taken for granted,” she added.