Highlights of the Credit Policy for the year 2003-04

• GDP growth in 2003-04, assuming satisfactory spatial distribution of monsoon, projected at about 6%.
• Bank Rate reduced by 0.25 bps to 6%.
• CRR reduced by 0.25 bps to 4.50%.
• Inflationary situation on an average basis remained low except in the fourth quarter during 2002-03 despite drought. Inflation is expected to be in the range of 5.0 to 5.5 per cent during 2003-04.
• Lower increase in reserve money despite sharp increase in RBI's foreign currency assets.
• Prudential measures for urban cooperative banks changed as per the Joint Parliamentary Committee recommendations.
• Money Supply (M3) remained within projected trajectory during 2002-03 and projected at 14.0 per cent for 2003-04.
• Sustained increase in credit flow during 2002-03; non-food credit to increase by 15.5 to 16.0 per cent during 2003-04.
• Sharp reduction in interest rates of banks and in government and corporate papers.
• Government borrowing programme completed at lower interest cost with longer maturity. Interest rates on corporate paper are all time low.
• Reserves build up at a low effective cost without adding to external debt.
• Low interest rates and strong forex position prompts prepayment of external debt.
• RBI to provide adequate liquidity to meet credit growth and support investment demand.
• Preference for a soft and flexible interest rate environment to continue.
• Export credit refinance facility to continue.
• Interest rate on back-stop facility reduced.
• Transparent system to determine prime lending rate (PLR) of banks.
• Uniformity in maturity structure of repatriable foreign currency as well as rupee Non-Resident Indian deposits.
• Overseas investments liberalised and flexibility allowed to overseas investors for flow of foreign direct investment.
• Further measure to improve credit delivery mechanism to priority sector.
• Changes in prudential measures for UCBs in line with JPC recommendations.