Naina Lal Kidwai's take on the RBI rate hike

Naina Lal Kidwai's take on the RBI rate hike

Naina Lal Kidwai, the iconic chartered accountant, and currently the Country Head of HSBC India, also the President of FICCI (Federation of Indian Chambers of Commerce and Industry), has recently opined on the pressure that has built up on RBI to hike interest rates, propelled by the current weak condition of the rupee. She has remarked that any such increase would be a “body blow” to industry and growth. The rupee has seen its lowest position in recent times, plunging to a record low point of 61.21 against the dollar. Going by the data, it has lost 7.3% this year. According to speculations that are rife amongst experts, chiefly economists and the likes, RBI would be compelled to raise policy rates to meet with the ongoing inflationary expectations, due to the present volatility of the rupee. Kidwai feels that what we now require is confidence, to make a foray again into industry in terms of investments and growth. She has expressed her wish that banks should transmit series of interest rate reduction as undertaken by RBI since January, 2012. Owing to the current economic status of the country, imports have become dearer, domestic currency has depreciated, and consequently, inflation can again crop up as a pestering issue. Kidwai has reportedly told that she hopes and believes that interest rate hike will not have to be encountered in the near future; rather, we should count on its reduction instead, if that is possible by any means. According to her, high current account deficit (CAD) is the root factor behind many such problems. There has been a lot of import of gold; hence, she feels that tightening up on gold can put an end to inflations raising its ugly head over and over again. However, adequate precaution should also be taken lest the gold jewellery makers should be messed up. Since they also have been complaining of their inaccessibility to gold, it implies that they have a problem with exports, which needs to be redressed. She does not agree to the speculation that policy rate hike will lead to an increase in cost of funds, which she justifies by saying that credit off-take has also been low. She accounts for this lowness by saying that a large number of users are involved in infrastructural projects which are yet to take off. Depending on their take-off, banks will start opening the tap for these projects, which can lead to liquidity crunch. She adds that when that happens, RBI will increase the LAF limit. CAD, the difference between the outflow and inflow of foreign currency, had reached its highest till date value of 4.7% in 2012-13. Kidwai wished that banks should transmit a series of interest rate reduction undertaken by RBI.

You May Also Like

Naina Lal Kidwai – Harvard, HSBC and the Lean In movement

Naina Lal Kidwai – Harvard, HSBC and the Lean In movement

The fact that I was the first Indian woman to graduate from Harvard Business School in 1982 was a gratifying personal achievement but a sad social comment. Indian men had been...

Naina Lal Kidwai: Balancing dual roles

Naina Lal Kidwai: Balancing dual roles

Naina Lal Kidwai is one of the most powerful businesswomen in the world, and is also regarded as being one of the first women to break stereotypes which demand that a woman...

Naina Lal Kidwai's strategy for HSBC

Naina Lal Kidwai's strategy for HSBC

As the Group Manager and Country Head of HSBC India, Naina Lal Kidwai needs no introduction in the world of banking and business. An alumni member of Harvard Business School,...

Meryl Streep - One of her kind!

Meryl Streep - One of her kind!

Regarded as one of the most talented actresses of the current era, Meryl Streep has won the hearts of millions of movie-lovers not only on the silver screen but also as a...

Image Gallery