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Highlights: RBI Monetary and Credit Policy
Following are the highlights of the Monetary and Credit Policy that the Reserve Bank of India announced on Tuesday.
**RBI hikes CRR by 0.25 per cent from May 24;
**Repo, Reverse Repo, Bank Rates unchanged.
**RBI projects economy to grow by 8-8.5 per cent in 2008-09;
**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.
**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.
**Scheduled banks required to maintain CRR of 8.25 per cent with effect from the fortnight beginning May 24, 2008.
**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 (Rs 5,500 billion) during 2008-09.
**Adjusted non-food credit projected to increase by around 20.0 per cent during 2008-09.
**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 to sell 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.
Following are the highlights of the Monetary and Credit Policy that the Reserve Bank of India announced on Tuesday.
**RBI hikes CRR by 0.25 per cent from May 24;
**Repo, Reverse Repo, Bank Rates unchanged.
**RBI projects economy to grow by 8-8.5 per cent in 2008-09;
**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.
**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.
**Scheduled banks required to maintain CRR of 8.25 per cent with effect from the fortnight beginning May 24, 2008.
**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 (Rs 5,500 billion) during 2008-09.
**Adjusted non-food credit projected to increase by around 20.0 per cent during 2008-09.
**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 to sell 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.
