Key Rate Change: CRR hiked by a further 25 bps to 8.25% by May 24, 2008
Outcome: To drain out an additional Rs. 9250/- Crores and moderate monetary expansion
Impact: To curb inflation now being targetted at 5.50%
Highlights of the Annual Policy Statement from RBI for the year 2008-09
Highlights
· High priority to price stability, well-anchored inflation expectations and orderly conditions in financial markets while sustaining the growth momentum.
· Swift response on a continuous basis to evolving adverse international and domestic developments through both conventional and unconventional measures.
· Emphasis on credit quality and credit delivery while pursuing financial inclusion.
· Bank Rate, Reverse Repo Rate and Repo Rate kept unchanged.
· Scheduled banks required to maintain CRR of 8.25 per cent with effect from the fortnight beginning May 24, 2008.
· GDP growth projection for 2008-09 in the range of 8.0- 8.5 per cent.
· Inflation to be brought down to around 5.5 per cent in 2008-09 with a preference for bringing it close to 5.0 per cent as soon as possible. Going forward, the resolve is to condition policy and perceptions for inflation in the range of 4.0-4.5 per cent so that an inflation rate of around 3.0 per cent becomes a medium-term objective.
· M3 expansion to be moderated in the range of 16.5-17.0 per cent during 2008-09.
· Deposits projected to increase by around 17.0 per cent or Rs.5, 50,000 crore during 2008-09.
· Adjusted non-food credit projected to increase by around 20.0 per cent during 2008-09.
· Active demand management of liquidity through appropriate use of the CRR stipulations and open market operations (OMO) including the MSS and the LAF.
· Introduction of STRIPS in Government securities by the end of 2008-09.
· A clearing and settlement arrangement for OTC rupee derivatives proposed.
· Domestic crude oil refining companies would be permitted to hedge their commodity price risk on overseas exchanges/markets on domestic purchase of crude oil and sale of petroleum products based on underlying contract.
· Currency futures to be introduced in eligible exchanges in consultation with the SEBI; broad framework to be finalised by May 2008.
· Indian companies to be allowed to invest overseas in energy and natural resources sectors.
· Reserve Bank can be approached for capitalisation of export proceeds beyond the prescribed period of realisation.
· Loans granted to RRBs for on-lending to agriculture and allied activities to be classified as indirect finance to agriculture.
· The shortfall in lending to weaker sections would be taken into account for contribution to RIDF with effect from April 2009.
· RRBs allowed selling loan assets to other banks in excess of their prescribed priority sector exposure.
· The Reserve Bank to disseminate details of various charges levied by banks.
· Asset classification norms for credit to infrastructure projects relaxed.
· The prudential guidelines for specific off-balance sheet exposures of banks to be reviewed.
· Reserve Bank to carry out supervisory review of banks' exposure to the commodity sector.
· The limit of bank loans to individuals for housing having lower risk weight of 50 per cent enhanced from Rs. 20 lakh to Rs. 30 lakh.
· Consolidated supervision of financial conglomerates proposed.
· Working Group to be set up for a supervisory framework for SPVs/Trusts.
· Inter-departmental Group to review the existing regulatory and supervisory framework for overseas operations of Indian banks.
· All transactions of Rs. one crore and above made mandatory to be routed through the electronic payment mechanism.
· Dispense with the extant eligibility norms for opening on-site ATMs for well-managed and financially sound UCBs.
· Regulations in respect of capital adequacy, liquidity and disclosure norms for systemically important NBFCs to be reviewed.
Outcome: To drain out an additional Rs. 9250/- Crores and moderate monetary expansion
Impact: To curb inflation now being targetted at 5.50%
Highlights of the Annual Policy Statement from RBI for the year 2008-09
Highlights
· High priority to price stability, well-anchored inflation expectations and orderly conditions in financial markets while sustaining the growth momentum.
· Swift response on a continuous basis to evolving adverse international and domestic developments through both conventional and unconventional measures.
· Emphasis on credit quality and credit delivery while pursuing financial inclusion.
· Bank Rate, Reverse Repo Rate and Repo Rate kept unchanged.
· Scheduled banks required to maintain CRR of 8.25 per cent with effect from the fortnight beginning May 24, 2008.
· GDP growth projection for 2008-09 in the range of 8.0- 8.5 per cent.
· Inflation to be brought down to around 5.5 per cent in 2008-09 with a preference for bringing it close to 5.0 per cent as soon as possible. Going forward, the resolve is to condition policy and perceptions for inflation in the range of 4.0-4.5 per cent so that an inflation rate of around 3.0 per cent becomes a medium-term objective.
· M3 expansion to be moderated in the range of 16.5-17.0 per cent during 2008-09.
· Deposits projected to increase by around 17.0 per cent or Rs.5, 50,000 crore during 2008-09.
· Adjusted non-food credit projected to increase by around 20.0 per cent during 2008-09.
· Active demand management of liquidity through appropriate use of the CRR stipulations and open market operations (OMO) including the MSS and the LAF.
· Introduction of STRIPS in Government securities by the end of 2008-09.
· A clearing and settlement arrangement for OTC rupee derivatives proposed.
· Domestic crude oil refining companies would be permitted to hedge their commodity price risk on overseas exchanges/markets on domestic purchase of crude oil and sale of petroleum products based on underlying contract.
· Currency futures to be introduced in eligible exchanges in consultation with the SEBI; broad framework to be finalised by May 2008.
· Indian companies to be allowed to invest overseas in energy and natural resources sectors.
· Reserve Bank can be approached for capitalisation of export proceeds beyond the prescribed period of realisation.
· Loans granted to RRBs for on-lending to agriculture and allied activities to be classified as indirect finance to agriculture.
· The shortfall in lending to weaker sections would be taken into account for contribution to RIDF with effect from April 2009.
· RRBs allowed selling loan assets to other banks in excess of their prescribed priority sector exposure.
· The Reserve Bank to disseminate details of various charges levied by banks.
· Asset classification norms for credit to infrastructure projects relaxed.
· The prudential guidelines for specific off-balance sheet exposures of banks to be reviewed.
· Reserve Bank to carry out supervisory review of banks' exposure to the commodity sector.
· The limit of bank loans to individuals for housing having lower risk weight of 50 per cent enhanced from Rs. 20 lakh to Rs. 30 lakh.
· Consolidated supervision of financial conglomerates proposed.
· Working Group to be set up for a supervisory framework for SPVs/Trusts.
· Inter-departmental Group to review the existing regulatory and supervisory framework for overseas operations of Indian banks.
· All transactions of Rs. one crore and above made mandatory to be routed through the electronic payment mechanism.
· Dispense with the extant eligibility norms for opening on-site ATMs for well-managed and financially sound UCBs.
· Regulations in respect of capital adequacy, liquidity and disclosure norms for systemically important NBFCs to be reviewed.
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