RBI's Annual Policy for 2009-10

RBI Annual Policy Statement for the Year 2009-10

Highlights

GDP growth for 2008-09 is projected to be in the range of 6.5 to 6.7 per cent

Repo rate under the Liquidity Adjustment Facility (LAF) reduced by 25 basis points from 5.0 per cent to 4.75 per cent with immediate effect.

Reverse repo rate under the LAF reduced by 25 basis points from 3.5 per cent to 3.25 per cent with immediate effect.

The Bank Rate has been retained unchanged at 6.0 per cent.

The cash reserve ratio (CRR) of scheduled banks has been retained unchanged at 5.0 per cent of net demand and time liabilities (NDTL).

 Special Term Repo Facility: Extension

The Reserve Bank introduced a special 14-day term repo facility for banks in September 2008 through relaxation in the maintenance of SLR to enable them to meet the liquidity requirements of mutual funds (MFs), non-banking financial companies (NBFCs) and housing finance companies (HFCs).

It has been proposed:

To extend the time for availability of this special term repo facility to banks up to March 31, 2010, and to conduct these 14-day term repo auctions on a weekly basis.

Other Observations

Special Refinance Facility Extension - Special refinance facility was introduced to provide funding to scheduled commercial banks (excluding regional rural banks) up to 1.0 per cent of their net demand and time liabilities (NDTL) as on October 24, 2008 at the repo rate. It is proposed to extend this special refinance facility up to March 31, 2010.

Monetary Projection - Money supply (M3) growth for 2009-10 is placed at 17.0 per cent. Consistent with this, aggregate deposits of scheduled commercial banks are projected to grow by 18.0 per cent. As always, these numbers are provided asindicative projections and not as targets

Inflation Projection - The WPI inflation is expected to be in the negative territory in the early part of 2009-10. Keeping in view the global trend in commodity prices and domestic demand-supply balance, WPI inflation is projected at around 4.0 per cent by end-March 2010.

Policy Stance

According to RBI, on the basis of the above overall assessment, the stance of monetary policy in 2009-10 will broadly be as follows:

 Ensure a policy regime that will enable credit expansion at viable rates while preserving credit quality so as to support the return of the economy to a high growth path.

Continuously monitor the global and domestic conditions and respond swiftly and effectively through policy adjustments as warranted so as to minimise the impact of adverse developments and reinforce the impact of positive developments.

 Maintain a monetary and interest rate regime supportive of price stability and financial stability taking into account the emerging lessons of the global financial crisis.

Source: RBI press release