RBI leaves bank rate, CRR untouched

Much to market players’ disbelief, the Reserve Bank of India (RBI) kept the Bank Rate and Repos Rate unchanged at 6 per cent and 4.50 p...

Much to market players’ disbelief, the Reserve Bank of India (RBI) kept the Bank Rate and Repos Rate unchanged at 6 per cent and 4.50 per cent respectively. The RBI has also spared the cash reserve ratio (CRR), keeping the ratio at 4.50 per cent. The decision of keeping the key rates unchanged is very much in line with the global trend which saw a clear signal that the interest rates are bottoming out. The RBI, however, reiterated that its present stance of preference for a soft and flexible interest rate environment would continue.

The Reserve Bank of India continued with its overall stance of making adequate liquidity available to meet credit growth and support investment demand in the economy. Since the announcement of the monetary and credit policy in April 2003, the world economic outlook has improved and the gross domestic product growth is placed higher with a benign inflation outlook. The Reserve Bank of India has noted that in the domestic banking sphere, there are indications to an improved credit pick-up.

PRIORITY SECTOR LOANS GET A BOOST: It’s time again to prioritise rural lending. The Reserve Bank of India (RBI) has in its mid-term review of monetary and credit policy laid emphasis on the priority-sector credit delivery by hiking the credit-limit to SSI sector in one hand, and rationalising the interest rate on the deposits of foreign banks placed with Small Industries Development Bank of India (Sidbi) towards their priority sector shortfall on the other. The RBI has reduced and realigned the interest rate (currently at 6.75 per cent) on the deposits of foreign banks placed with Sidbi towards their priority sector shortfall with the Bank Rate. As on date, the Bank Rate stands at 6 per cent. The RBI has also said that Sidbi would take appropriate steps to ensure that priority sector funds are utilised expeditiously and benefits of reductions in interest rates passed on to the borrowers. Welcoming the move, an senior Sidbi official said that it had been making representations to the RBI to rationalise the interest on such deposits. “The current rate of 6.75 per cent was high in the current interest rate scenario. There were not many opportunities to deploy funds with such a high rate,” the official added.

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Reddy-made: Economy bullish

MUMBAI: Dr Y. Venugopal Reddy continued to follow the path traversed by his predecessor Dr Bimal Jalan. There were no major announcements except for the higher economic growth forecast in the current fiscal.

• Lending and deposit rates to remain unchanged. The benchmark interest rate signal, bank rate — the rate at which RBI refinances banks — kept unchanged at 6 per cent.
• The economy is forecast to grow by 6.5 to 7% in the fiscal year 2003-04, up from earlier estimate of six per cent.
• Inflation projected at 4-4.5% by end-March 2004, down from an earlier estimate of 5-5.5%.
• Financial market sentiment is stronger now than at the beginning of the year. But there is a need for continuous and careful monitoring since there could be overshooting in markets during an upturn.
• Improved macro-economic environment with positive outlook on both the external and domestic fronts.
• In order to improve the flow of credit to small scale industries, banks can increase the loan limit to Rs 25 lakh from Rs 15 lakh for the dispensation of collateral requirements.
• New advisory committee to be formed to suggest short-term and medium-term measures to enhance credit flow to the agricultural sector.
• It has proposed setting up a standing technical advisory committee on financial regulation of banks, non-bank financial institutions and other market participants.

‘NDA’s cracks visible, Nitish Kumar a burden’: Kharge hits out at BJP in Patna

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Congress President Kharge slammed the BJP-led NDA government in Bihar for causing internal conflicts and religious division. He predicted the 2025 Assembly elections will end the Modi government's corrupt rule. The party strategized to attack the BJP over "vote chori" and criticized the Election Commission's handling of electoral rolls. Kharge also accused PM Modi of being diplomatic.

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