reg RBI rate hike

[Mani KG]

Hi all,
Nice article suggesting alternative ways to check inflation.
http://www.thehindubusinessline.com/opinion/article2577372.ece?homepage=true

certain views on the practical usage of the same.
1) higher capital charge to selective inflationary sectors may not be possible
in the present scenario as there is a capital constraint
especially in major public sector banks
2) also with the banks now depending on external or internal ratings
for allocation of capital charge, this sort of sector specific
allocation
needs a policy level change in basel norms , so i feel it's not a
quick solution.
3) with CRR, SLR are intended to maintain liquidity in the banking
system, i feel the combined effect of CRR and repo rate increase to
contain inflation would yield different results and difficult to
interpret.

regards,
manikg