Bloomberg News

Federal Bank’s Chacko Says Rupee, Oil to Decide India Inflation

October 25, 2011

Oct. 25 (Bloomberg) -- Abraham Chacko, an executive director Federal Bank Ltd., comments on India’s interest rates. The Reserve Bank of India today raised the repurchase rate to 8.5 percent from 8.25 percent. Eighteen of 28 economists in a Bloomberg News survey predicted the decision. Chacko spoke in a phone interview from Mumbai.

“The central bank estimates inflation will ease by December, which means we have pain for about one more quarter.

‘‘The concern is how much of the rate increase is passed on and what banks decide on that. Because of the global economy being where it is, the buoyancy isn’t there in the economy.

‘‘I believe lenders would absorb the rate increase because indications are that this is the last. Any increase in deposit or advances rate will increase difficulties in maintaining margins. We would decide for ourselves in the next few days.

‘‘The risk to the central bank’s projections are on the commodity prices side. If crude prices go up and the rupee remains weak there will be a huge impact on inflation and the banking sector, which will be difficult to control.’’

--Editor: Abhay Singh

To contact the reporter on this story: Anoop Agrawal in Mumbai at

To contact the editor responsible for this story: Hari Govind at

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