Amid bankers and industry crying foul over RBI’s move to squeeze liquidity, the Reserve Bank of India Governor D. Subbarao today met Finance Minister P. Chidambaram ahead of the first quarter policy review next week.
The meeting assumes importance in the backdrop of RBI taking a series of measures to tighten liquidity and check import of gold with a view to arrest the rupee fall. In its first quarterly review of monetary policy to be unveiled on July 30, RBI will have to take a call on interest rates and improvement of the liquidity situation.
To arrest the rupee fall, which fell to all-time low of 61.21 to a dollar on July 8, the central bank has raised the rates at which banks borrow short-term funds from RBI and reduced their borrowing limits. Besides, it took steps to discourage gold imports and encourage the repatriation of funds by exporters.
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