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Finally, the RBI Governor mustered some courage to hike the much needed Repo and Reverse Repo rates by 25bps and 50 bps during its monetary policy review meeting today. With this, the repo rate will stand at 5.75% and reverse repo rate will go up to 4.5%. Meanwhile, CRR has been kept unchanged at the current level of 6.0%. Story Updating..

RBI embarked on gradual exit from an overtly accommodative monetary stance, while ensuring that the nascent recovery is not
derailed. Thereafter, as recovery gathered momentum and so did inflation, RBI’s stance was one of balancing the objectives of

With Inflation showing no signs of abatement and corporate profits on the upswing, it is high time that RBI act as an independent regulator in the interest of Indian consumer and not South Block.

In the forthcoming announcement of monetary and credit policy on July 27, markets expect 25bps hike in both repo and reverse repo rates and no change in CRR. This expectation is based on the view that as the economy inches towards normalcy, policy rates also need to firm up to their long-term ‘steady-state’ level. Any more aggressive tightening is unwarranted at this juncture in analysts

Several Moves in the market fixing the base rate and effecting the Repo and Reverse Repo rate come too late in our view as the RBI seems to be under Pressure from South Block and is not acting in the interest of the Nation for which it has been created. Inflationary pressure has been in Double Digits and we simply don’t understand why RBI is refusing to suck the excess liquidity driving prices like crazy.

The RBI under criticism from all corners took a baby

India’s BoP recorded a surplus of USD 2.1 bn during Q4FY10, more or less same as the previous quarter. Current account balance worsened a bit from the previous quarter, but was compensated by almost equal increase on the capital account.

Current account deficit stood at ~USD 13 bn during the quarter under review, amounting to ~3.4% of GDP, historically on the higher side. Among the important components of the current account, merchandise balance and private transfers deteriorated, while

Liquidity condition in the system has tightened with banks borrowing heavily from the Reserve Bank of India (RBI) through its repo window. The dry up of liquidity from the system was mainly triggered by the Rs 68,000 crore payments made by telecom companies to government to acquire bandwidth for third generation (3G) mobile telecom licenses. Liquidity conditions are likely to improve as government starts spending money that it has received from the telecom companies.

Banks borrowed slightly over Rs 13,000 crore on Tuesday from the apex bank, more than double the amount borrowed on Monday. Banks borrowed Rs 5,840 crore through the repo window in the morning and Rs 7,325 crore in the second half on Tuesday.

Unlike the West, most of Indian Government Fiscal Deficit is financed by internal holdings. India is the only one emerging market amongst the high-government deficit countries in 2009 – India. And India, with a gross general government debt to GDP ratio of over 80 percent during 2009 (see IMF(2010)), is much better able to manage a more than 10 percent of GDP general government deficit,