Current high inflation does not warrant SLR cut: FM
"Nobody is going to cut SLR now given the current situation... Problem today is inflation," said FM.
By PTI |
NEW DELHI: Concerned over high rate of inflation, Finance Minister P Chidambaram did not not see any possibility of further easing of liquidity in the system.
"Nobody is going to cut SLR (Statutory Liquidity Ratio) now given the current situation... Problem today is inflation. Keep that in mind," Chidambaram said in an interview to news channel.
Statutory Liquidity Ratio (SLR) is a mandatory requirement for banks to keep a portion of their deposits in government bonds. The limit currently is at 25 per cent and yesterday President A P J Abdul Kalam gave assent to an ordinance empowering RBI to cut it below 25 per cent.
The Reserve Bank is slated to come out with quarterly credit review on January 31.
Inflation has reached a two-year high of 6.12 per cent for the week ended January 6.
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One per cent cut in SLR releases about Rs 25,000 crore in the system. Chidambaram said liquidity is ample in the system and Liquidity Adjustment facility of RBI takes care of that.He said inflation in a way "is a price we are paying for our success. Money coming in various sectors is feeding inflation." He said his ministry has already taken measures on fiscal side to arrest inflation. The government has cut customs duty on 11 product categories and today it slashed customs duty on edible oils.
RBI is taking monetary measures, he said, adding steps like increasing supply of food products are not short term measures. While pulses production has been stagnating, demand has increased by 20 per cent, he said.
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