Credit policy 'standstill'; FM supports RBI's monetary stance

New Delhi, Jan 29 (UNI) Finance Minister P Chidambaram today described the credit policy review by the RBI as "standstill", and said the Central Bank by keeping interest rates unchanged has provided flexibility to move either way depending upon the international situation and the liquidity position.

Giving his reaction on the third quarter review of the credit policy, Mr Chidambaram told Reporters here that there was no surety as to whether capital flows will surge further or will withdraw, primarily due to pay ups for the sub-prime crisis in the United States. "The cat may jump either way," he quipped.

Mr Chidambaram said he would discuss ways to manage the liquidity situation when RBI Governor Y V Reddy meets him in Delhi soon.

RBI today left all the key rates - Bank Rate, reverse repo, repo and Cash Reserve Ratio intact.

When asked that while he favoured lowering interest rates, while the credit policy has not been touched, Mr Chidambaram said personal views in such matters do not matter adding that he endorsed the Reserve Bank's stance on monetary policy.

He said there was no indications that India's economic growth rate will slow down. "The economy has registered robust performance", he remarked.

Mr Chidambaram said the entire world perceives India's economy as robust and enjoined upon public not to be unduly "influenced or overwhelmed" by the views of US analysts. He said the gap between interest rates in India and America have indeed increased due to cut announced by the US Fed. .

However, it was not sure that capital flows would increase due to the US Central Bank's move, he said.

"We do not know. We don't know what will happen yet", he said.

There could be outflow of capital as well, he added.

The Finabce Minister said: "I endorse RBI's approach. The Governor has reinforced price stability, emphasised credit quality and credit delivery, particularly to the employment intensive sectors." He said non-food credit growth has decelerated, but that was the purpose of RBI's previous policies. However, growth in money supply and aggregate deposits of Scheduled commercial banks still continue to be high.

Mr Chidambaram noted that the RBI had projected a growth of 8.5 per cent for the economy during 2007-08 and contain inlfation close to five per cent in the current fiscal.

While the bank rate is currently pegged at 6 per cent, the reverse repo rate and the repo rate have been notified at 6 per cent and 7.75 per cent respectively. The Cash Reserve Ratio stands at 7.5 per cent.

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