Room to cut rates only if inflation eases: SS Mundra

Kolkata: Reserve Bank of India deputy governor S.S. Mundra said on Wednesday the central bank would have room to cut interest rates should factors leading to lower inflation continue.The comments come ahead of consumer inflation data due on Friday. The RBI held interest rates steady earlier this month, but said it could ease monetary policy early next year.

Mr Mundra also said the central bank would grant licences to so-called payment banks by March or April after releasing the final guidelines for applications last month. Meanwhile, Mr Mundra also informed that the RBI would shortly come out with guidelines on refinance of exi-sting projects as dema-nded by the industry “There is a demand from the industry for refinance of existing projects. RBI will come out with the guidelines soon,” he said at a CII interaction here. He said new projects would get the scope for refinance every five years till the economic life of the projects as already declared. “But for existing projects, the guidelines will be out soon,” he said.

Sounding a word of caution on big projects having thin equity, Mr Mundra said, “There are many projects based on thin equity. This is like skating on thin ice.” He said that when economic growth is robust, such projects carry on as many of the ills are taken on stride. “But when growth falters, signs of early distress crop in. RBI is keeping a vigil on projects which are having thin equity to see whether there are signs of early distress,” he added.

Ahead of the RBI central board meeting here on Thursday, Mr Mundra said the regulator was keeping its ears close to the ground. He gave a rider saying “some uncertainties will always remain like the level of inflation”.