6 December, 2008
The RBI today announced one percentage point cut in the short-term rates at which it lends and borrows from banks, along with many other measures.
The RBI's move to slash the key short term rates by 100 basis points is likely to help stabalize the volatile stock market say analysts, cautioning that the impact of fresh monetary measures would be short lived as these are in line with expectations.
Main Higlights of RBI's Monetary Policy:
- FCCBs are now being allowed to be bought back by Indian corporates, basically issuers out of their own dollar resources raised through ECB or FCCB
- Repo rate cut by 100 basis points to 6.5 percent
- Reverse repo rate cut by 100 basis points to 5 percent
- No changes in cash reserve ratio and statutory liquidity ratio
- Refinance of Rs.7,000 crore (Rs.70 billion/$1.4 billion) for Small Industries Development Bank of India
- Refinance of Rs.4,000 crore (Rs.40 billion/$800 million) for National Housing Bank
- Housing loans under Rs.20 Lakh classified under priority sector
- Exceptional treatment to commercial real estate exposures
- Second restructuring done by banks of exposures (other than exposures to commercial real estate, capital market exposures and personal/ consumer loans) up to June 30, 2009, will also be eligible for exceptional regulatory treatment.
- Decided to extend exceptional/ concessional treatment to the commercial real estate exposures which are restructured up to June 30, 2009
- Measures should step up demand and arrest the growth moderation
- Net liquidity since September enhanced by Rs.300,000 crore (Rs.3,000 billion/$60 billion)
- Difficult to precisely anticipate every development of global crisis
- Recession will be deeper, recovery longer than earlier anticipated
- Period of painful adjustment for Indian economy inevitable
- Fundamentals of Indian economy continue to be strong
- Economists predicting the worst global recession since the 1970s
- Confidence in global credit markets continues to be low
- Credit lines remain clogged
- India's exports declined in October for first time in seven years
- Demand for bank credit slackening, despite comfortable liquidity
- But inflation, based on wholesale prices, declining |
