Pranab Mukherjee expects inflationary pressures to continue due to higher fuel prices
New Delhi: While the food and fuel inflation figures announced today have shown signs of easing, union finance minister Pranab Mukherjee has said that inflationary pressures are likely to continue due to the increase in rates of petroleum products a fortnight ago.
"There is inflationary pressure in the system and these weekly variations (in food inflation numbers) are mainly because of the base effect," Mr Mukherjee said.
He said the overall inflation in June could see some upward movement, from the 9.06% recorded in May, mainly on account of the fuel price hike announced on 24th June, PTI reports.
The 7.61% rise in prices of food items for the week ended 25th June is the lowest since the week ended 7th May when food inflation was at 7.47%.
On a weekly basis the index on fuel and power rose to 166.3 points from 160.2 points in the previous week. Overall fuel and power inflation stood at 12.67%.
"This six points increase is mainly because of enhancement of prices of diesel, kerosene and LPG. That has its impact," Mr Mukherjee said.
While experts said the softening of price rise is likely to continue as the monsoon progresses, the price rise of fuel could affect the overall trend.
They also said that the fuel price hike may spill over into the food segment in the form of higher transportation costs for grains and other crops.
Minimum lending rate at 9.5%; fixed deposits from 1-10 years to earn 9.25%
New Delhi: State Bank of India (SBI), the country's biggest lender, today increased lending rates by 25 basis points and raised deposit rates by up to 100 basis points, a move that will make home, auto and other loans more expensive, but provide better returns to savers.
The bank has revised the base rate, or the minimum lending rate, upwards by 25 basis points (bps), or 0.25%, to 9.5% with effect from 11 July 2011, the Bank announced in a statement.
The interest rates on fixed deposits with a maturity period of 1-10 years has been fixed at 9.25%. The new deposit rates are effective also from 11th July.
The bank has also raised its benchmark prime lending rate (BPLR) that is used to determine floating interest rate loans, which has been increased from 14% to 14.25%, PTI reports.
The decision to hike the rates comes after the Reserve Bank of India hiked key policy rates at its policy review last month. ICICI Bank, Canara Bank, Bank of Baroda have already raised lending rates.
SBI said today that deposits up to 90 days would fetch an interest rate of 7% as against 6.25% current. The rates for fixed deposits with a maturity period of 1-10 years would be 9.25%. Current deposits between 1 year and 554 days earn an interest of 8.25%.
SBI has also decided to waive the penalty for premature withdrawal of deposits up to 90 days and it has reduced the penalty on other deposits to 0.5% from 1%.
On 16th June, the RBI hiked key short-term lending and borrowing rates by 25 bps, continuing with its measures to subdue inflation. The short-term lending (repo) rate was up to 7.5% and the borrowing (reverse repo) rate to 6.5%.
Last week, besides ICICI Bank, other public sector lenders like Indian Overseas Bank, Corporation Bank and Dena Bank also hiked their base rate by 25 basis points each.
While most other banks have raised the lending rates, SBI is the first bank to announce a hike in both lending and deposit rates.
The RBI has promised to present the Damodaran Committee report to the Karnataka High Court even as Mr Damodaran has failed to provide his “transmittal” as the chairman of the Committee
Under the threat of the Reserve Bank of India's (RBI) governor being summoned by the Karnataka High Court, the apex bank will release the report by the M Damodaran committee on customer service—without the transmittance of Mr Damodaran himself.
Moneylife has been repeatedly reporting on how the report (despite being ready) was not being released by the Committee head, Mr Damodaran (please scroll down for the previous articles) for reasons best known to him.
Some members have informally informed Moneylife that the report was not released as it did not have transmittance of Mr Damodaran. But even Committee members were unaware, as also RBI officials, were completely in the dark as to why the release of the report was not being green-signalled by Mr Damodaran.
However, the report will now see the light of day thanks to an accidental happening. Apparently, while hearing a public interest litigation (PIL) challenging the penalty levied on account holders by banks for not maintaining a minimum balance in their accounts, the Karnataka High Court was being repeatedly told that all the banking service related issues would soon to reviewed, after the Damodaran Committee submits its report. After a few such hearings, the Court impatiently wanted to know when would the committee report be released. A division bench comprising Chief Justice JS Khehar and Justice HG Ramesh came down heavily on the apex bank for not submitting the report, even after the Court had granted many adjournments for submitting the same. In fact, the High Court warned that it would not hesitate to summon the governor of the RBI, if the report was not placed before the next date of hearing.
According to a report dated 6th July in The Hindu, the RBI has informed the Karnataka High Court that the report of the Damodaran Committee has finally been submitted on 4th July—sans Mr Damodaran's "transmittal". The Court has granted four weeks to the RBI to submit its report before it.
Until recently, it was reliably learnt that the report was not released because it did not have transmittance of Mr Damodaran who has been mysteriously reluctant to write the letter (transmittal) which would have formally meant handing over the independent committee's report to the RBI.
Recently, while replying to a Right to Information (RTI) application which inquired about the status of the report, the RBI said that the report is "yet to be transmitted." (See: RBI flip-flops on customer service report ). The RTI Act was evoked by Mumbai-based activist Nagesh Kini, with the RBI, to find out the status of the report, as it was over a year now that several people have submitted their recommendations to the Committee—but there is no sign of the report being finalised.
In its reply to Mr Kini's RTI application, the central bank had said that a "timeframe of four months from the date of the first meeting of the committee was set for submission of the report." This was extended by three months. Considering this, the report should have been out in the public domain by now. It's been over 12 months since the first meeting was held on 15 June 2010, but the report has been released only on 4th July.
The Committee was constituted in June last year to review the system of customer service and grievance redressal by banks. It was expected to undertake a strict review of the existing system of the Banking Ombudsman Scheme and customer service in banks, including the approach, attitude and fair treatment to customers in the retail, small and pensioner segments.
Moneylife sent a message to Mr Damodaran, but no reply has been received till the time of writing this story.
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