RBI must balance growth, inflation: Finance Secy .

The Reserve Bank of India will need to strike a balance between growth and inflation, even as the market expects the central bank to tighten the monetary policy on April 20, a senior Finance Ministry official said on Tuesday.

“I share the view of experts that some amount of tightening (monetary) is required. But there is the issue of growth to be taken care of. A balance between growth and inflation has to be there…,” Mr R. Gopalan, Secretary, Financial Sector, told reporters on the sidelines of a banking event here.

Mr Gopalan said that inflation was certainly a key issue that the upcoming RBI credit policy would address, but added that it was for the central bank to decide which instrument it would employ for this purpose.

In an inter-meeting move, the RBI had on March 19 raised key lending and borrowing rates by 25 basis points each. The RBI is to announce its monetary and credit policy for 2010-11 on April 20.

Economists and market watchers expect the RBI to go in for a hike in the policy rates and cash reserve ratio.

Mr Gopalan said that the Finance Ministry has moved a Cabinet note for capital infusion of Rs 15,000 crore in various public sector banks during the financial year.

The Centre proposes to infuse capital in banks whose tier-I capital adequacy was less than 8 per cent as on March 31.

The Department of Financial Services is working out the details of the banks that would qualify for recapitalisation funds, he added.

On State Bank of India's capital raising plans, Mr Gopalan said that SBI had not approached the Government with any proposal. “No formal proposal has come. They are looking at a number of options,” he said.

The SBI Chairman, Mr O.P. Bhatt, had recently said that the bank was looking to raise between Rs 10,000 crore and Rs 15,000 crore capital during 2011-12 and that he would prefer a rights issue.

The Government had last month introduced a Bill — the State Bank of India (Amendment) Bill, 2010 — in the Lok Sabha to reduce the minimum government holding in the bank to 51 per cent from 55 per cent.

Source : Business Line