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Following are the key points from the Reserve Bank of India's (RBI) annual policy statement released today (21st April 2009). The Reserve Bank of India (RBI) cut its key short-term rates by 25 basis points each to shore up faltering growth in the face of the global economic slowdown. INTEREST RATES REPO RATE: Cut by 25 bps to 4.75 percent. This is the rate at which the central bank adds funds to the money market. REVERSE REPO RATE: Cut by 25 bps to 3.25 percent. This is the rate at which the central bank absorbs funds from the market. It impacts government bond yields and short-term bank deposits. BANK RATE: Unchanged at 6.00 percent. Banks use this rate to price their long-term loans to individuals and companies. CASH RESERVE RATIO (CRR): Unchanged at 5.00 percent. The CRR is the percentage of banks' deposits which they must keep as cash with the central bank. GROWTH FORECAST: RBI expects that in 2009-10 GDP will grow by 6.0 percent as the growth for 2008-09 projected to be 6.5-6.7 percent INFLATION AIM: Wholesale price inflation is projected at around 4.0 percent by end March 2010. May turn negative in early 2009/10, but should not be seen as deflation for policy purposes. MONEY SUPPLY: Growth in money supply is expected to be at 17 percent in 2009-10. Deposits of commercial banks projected to grow by 18 percent. BORROWING AND LIQUIDITY: The RBI continues to maintain and will maintain ample liquidity in the system. Major challenge is to manage the large government borrowing in a non-disruptive manner. Large borrowings also militate against low interest rate environment that it is trying to maintain. To continue to use mix of monetary and debt management tools to ensure smooth government borrowing programme. LENDING AND DEPOSIT RATES: Room for banks' lending and deposit rates to come down. There is scope for overall interest rate structure to move down within the policy rate easing already undertaken. |
