The Reserve Bank will continue to be on guard against the price rise as the recent fall in Consumer Price Index-based inflation may be due to a base effect, Deputy Governor SS Mundra said on Thursday.
"There is a base effect, we know. And the base effect in the coming months would not have the same impact as it is having today," Mundra told a news channel in Mumbai. He was reacting to a question on the big decline in the CPI inflation at 5.52 per cent for October, which is much lower than the RBI's target of 8 per cent by January.
The RBI, which has been keeping rates at an elevated level citing the high inflation, wants to bring it down to 6 per cent by January 2016. It is scheduled to come out with its bi-monthly policy announcement on December 2.
The pro-growth economists and industrialists have been demanding rate cuts for quite some time. Mundra, who handles banking supervision, said the RBI has always adopted a cautious stance when it comes to managing inflation.
"We were always guarded (on inflation). RBI, as an organisation which has been given the responsibility of overseeing a large part of the financial sector, has to be on the guard always," he said.
"Base effects will also temper inflation in the next few months only to reverse towards the end of the year. The Reserve Bank will look through base effects," Governor Raghuram Rajan had said in his monetary policy announcement on September 30.
Mundra said the RBI continues to be concerned over the accretion of non-performing assets and will be looking at the data to see if the restructured assets are slipping into NPAs.
He also expressed concern over the delay in the appointment of chiefs in six state-run banks, adding that the RBI has taken up the issue with the government, which has said it will be filling up the positions soon.
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