RBI’s Second Quarter Review of Monetary Policy 2011-12

RBI announced the Q2 review of mon policy 2011-12

Here is my review of the policy. Here is  the expectations paper from the policy which was done on 21 Oct 2011. The policy was in line with expectations except that RBI was far more dovish than I thought. Also the deregulation of savings bank account rate was a major surprise.

This statement should be read with the discussion paper on savings rate deregulation which explains the pros and cons. Now only small savings schemes deregulation remains. Banks will be in for a tough time with already rising NPAs and now the rise on cost of these deposits. Yes Bank has already upped the savings rate from 4% to 6%. More action to follow…

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