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Highlights: Credit Policy Statement for the year 2006-07
- Focus on credit quality and financial
market conditions for maintaining macroeconomic, in particular, financial
stability.
- Monetary and interest rate environment
enabling growth momentum consistent with price stability.
- Bank Rate, Reverse Repo Rate, Repo Rate
and Cash Reserve Ratio kept unchanged.
- GDP growth projection for 2006-07 at
7.5-8.0 per cent.
- Inflation to be contained within 5.0-5.5
per cent during 2006-07.
- M3 projected to expand by around 15.0 per
cent for 2006-07. In normal circumstances, the policy preference would be
for maintaining a lower order of money supply growth in 2006-07.
- Deposits projected to grow by around
Rs.3,30,000 crore for 2006-07.
- Adjusted non-food credit projected to
increase by around 20 per cent, implying a calibrated deceleration from a
growth of around 30 per cent ruling currently.
- Appropriate liquidity to be maintained to
meet legitimate credit requirements, consistent with price and financial
stability.
- Ceiling interest rate on non-resident
(external) rupee deposits raised to US dollar LIBOR/SWAP plus 100 basis
points.
- Ceiling interest rate on export credit in
foreign currency raised to LIBOR plus 100 basis points.
- Provisioning for standard advances raised
to 1.0 per cent for personal loans, capital market exposures, residential
housing beyond Rs.20 lakh and commercial real estate loans.
- Risk weight on exposures to commercial
real estate raised to 150 per cent.
- Exposure to venture capital funds treated
as part of capital market exposure and assigned with higher risk weight of
150 per cent.
- ‘When issued’ market in Government
securities announced.
- Primary Dealers to be permitted to
diversify their activities.
- Barring the emergence of any adverse and
unexpected developments in various sectors of the economy and keeping in
view the current assessment of the economy including the outlook for
inflation, the overall stance of monetary policy at this juncture will be:
- to ensure a monetary and interest rate
environment that enables continuation of the growth momentum
consistent with price stability while being in readiness to act in a
timely and prompt manner on any signs of evolving circumstances
impinging on inflation expectations.
- to focus on credit quality and
financial market conditions to support export and investment demand in
the economy for maintaining macroeconomic, in particular, financial
stability.
- to respond swiftly to evolving global
developments.
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