(Adds details, quotes, background)
By Neha Dasgupta
PUNE, India, Nov 16 (Reuters) - India's inflation rate is
still high, the governor of the central bank said on Friday,
suggesting that the bank is unlikely to loosen monetary
conditions anytime soon to support faltering growth, despite a
slight easing in prices last month.
Duvvuri Subbarao's comments come after data on Wednesday
showed India's headline inflation rose 7.45 percent in October,
unexpectedly dropping to its slowest pace in eight months.
Subbarao has previously said he expects price pressures to
ease only in the first part of 2013, and has strongly indicated
any cut in interest rates would likely come in January at the
The inflation data had raised hopes the Reserve Bank of
India would consider a December rate cut, but the 10-year bond
yield rose 1 basis point to 8.20 percent
following Subbarao's comments as investors pared back some of
"We're always on high alert, high alert about growth, about
inflation certainly," Subbarao told reporters at the sidelines
of a conference.
He added inflation at 7.5 percent was "still quite high."
The central bank has faced pressure from the government and
industry to bring down the main policy rate from 8 percent, one
of the highest in Asia, as the continent's third-largest economy
expands at its slowest pace in nearly a decade.
Subbarao also said the central bank is prepared to issue new
bank licenses, but only if all the appropriate conditions are
put in place, reiterating the RBI's stance on allowing private
companies to enter the sector.
The RBI has faced pressure from the government to start
laying the groundwork towards issuing new banking licenses, but
the central bank has stated it prefers to wait until the Banking
Regulation Act is amended.
The amendment would give the central bank supervisory powers
over the private companies that would enter the banking sector,
but would need to be approved by parliament.
"We've been prepared in the Reserve Bank for launching this
process but all the ground work, all the enabling conditions for
launching this work have to be fulfilled," Subbarao said.
Finance Minister P. Chidambaram had called on the RBI on
Thursday to start finalising guidelines and proceed to receive
applications, saying the Banking Act would be amended.
"I have assured the RBI that the banking regulation act will
indeed be amended, hopefully in the winter session or in the
budget session," Chidambaram said in New Delhi on Thursday.
(Writing by Shamik Paul; Editing by Rafael Nam and Sanjeev