RBI hints withdrawal of easy monetary policy stance: Experts

NEW DELHI: The Reserve Bank on Tuesday signalled the withdrawal of the easy monetary policy stance by raising the Statutory Liquidity Ratio (SLR), the portion of funds that banks are required to park in government securities, by 100 basis points, said economists.

"Statutory Liquidity Ratio increase is just a beginning to withdraw liquidity out of the system. The RBI will tighten the monetary policy only when economy starts overheating. Currently, there is no need for that," former Prime Minister's Economic Advisory Council (PMEAC) Chairman Suresh Tendulkar said.

The RBI, which had been following soft monetary policy since September last year to inject liquidity into the system to help industry combat the impact of the global meltdown, today reversed its stance by increasing the SLR by one per cent to 25 per cent, though it kept other rates unchanged.

According to Moody's economy.com, "The RBI has adopted a tightening bias, but highlighted that with stable inflation expectations and weak private sector lending, it was not prepared to begin reversing monetary easing at this juncture."

The RBI has also retained economic growth projection to six per cent during 2009-10, while pegging inflation at much higher rate of 6.5 per cent by this fiscal end from earlier five per cent.