Credit Policy Revised
Third Quarter Monetary Policy Review
- RBI clarifies that its stance has shifted from ‘ managing the crisis’ to ‘managing the recovery’. Thus, the need to carry forward the process of ‘exit’ further.
- RBI raises the CRR of schedule commercial banks by 75 bps from 5.0% to 5.75% of their net demand and time liabilities in two stages: The first stage would involve a 50 bps hike in the fortnight beginning February 13, 2010 followed by another 25 bps hike effective from the fortnight beginning February 27, 2010.
- RBI keeps the repo, reverse repo and bank rate unchanged at 4.75%, 3.25% and 6.0% respectively.
- RBI revises its GDP forecasts for FY10 up from 6.0% to 7.5% but warns of an uneven recovery.
- RBI raises its base-line WPI inflation forecast for end-March 2010 from 6.5% to 8.5% but reiterates its medium term objective of bringing inflation to around 3.0%.
- RBI expects inflation to moderate from July, 2010 on the assumption of a normal monsoon, stable global oil prices and recent monetary measures undertaken.
- RBI reduces non-food credit and broad money supply growth targets down from 18.0% and 17.0% to 16.0% and 16.5% respectively. Aggregate deposits target also revised down from 18.0% to 17.0% for FY10.
- RBI warns that as growth accelerates and output gap closes, excess liquidity if allowed to persist, may exacerbate inflation expectations.
- RBI stresses that the opportunity to use imports to contain food prices is quite limited due to the elevated level of global commodity prices.
