Inflation levels and forex market conditions are likely to be the main factors that would determine the stance of the central bank in its mid-quarterly monetary policy review later this week. The Reserve Bank of India will take into account the behaviour of inflation as well as what is happening in the foreign exchange market and take a decision, said C Rangarajan,chairman of the Prime Ministers Economic Advisory Council on Monday. The RBIs recently appointed Governor Raghuram Rajan is scheduled to announce the mid-quarter review of the monetary policy for 2013-14 on September 20,just a few days after the meeting of the US Federal Reserves Open Market Committee. However,Rangarajan dismissed any further impact of tapering of the quantitative easing by the US Fed. The impact of the tapering has already been digested. The market has already reacted to that, he said on the sidelines of an Assocham conference,adding that adjustments to the tapering have been almost completed by now. A former governor of the RBI,Rangarajan also said that there should not be a bar on entry of new banks. If the Indian banking system is to remain competitive over time,there should be no bar on the entry of new banks; a closed system can only become oligopolistic, he said.
