RBI Guv Rajan bats for India, stumps India Inc

The markets reacted negatively to the development, with the Bombay Stock Exchange’s (BSE) benchmark 30-share S&P Sensex closing down 383 points and the National Stock Exchange’s (NSE) Nifty index plunging 103.45 points to 6,012.10. The MCX-SX’s 40-share index too ended down 205.69 points to 12026.41.  The rupee too fell by 46 paise to close at 62.23 against the dollar.

Explaining his strategy, Rajan said, ‘The need to anchor inflation and inflation expectations has to be set against the fragile state of the industrial sector and urban demand. Keeping all this in view, bringing down inflation to more tolerable levels warrants raising the repo rate by 25 basis points immediately.’ 

Rajan kept the cash reserve ratio, the portion of deposits banks must keep with the RBI in cash, unchanged at 4 per cent. The RBI also reduced the minimum daily maintenance of CRR from 99 per cent of the requirement to 95 per cent effective from 21 September, a move aimed at inducing liquidity into the system.