RBI to unveil credit policy on Tuesday | india | Hindustan Times
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RBI to unveil credit policy on Tuesday

The policy may contain measures to check prices that could in turn signal hardening of lending rates for home and other retail loans.

india Updated: Apr 17, 2006 17:46 IST

The Reserve Bank will unveil its annual slack season credit policy on Tuesday, which may contain measures to check prices that could in turn signal hardening of lending rates for home and other retail loans.

However, the policy may not tinker with the Cash Reserve Ratio -- the percentage of money that banks are supposed to park with RBI -- ensuring that there is adequate liquidity for investment in the face of a booming economy.

The central bank is also expected to provide hybrid instruments to bankers to help them address the "phenomenal" credit demand, the chairman and managing director of a public sector bank said, while declining to be identified.

Since the third quarter review of monetary policy in January this year, RBI governor Y V Reddy has been saying that the central bank has enough instruments to provide sufficient liquidity in the system.

The cash flow crunch, which aggravated after redemption of India Millennium Deposits in December last, had forced banks to hike lending rates.

Later, RBI obliged the bankers' by allowing them to increase rates on Foreign Currency Non-Resident (B) deposits and there has been considerable easing of the liquidity in the banking system.

The inflow of funds through Foreign Direct Investment as well as under portfolio investment scheme has been noticeable. Higher government spending and the return of farm sector credit would only improve the situation, the PSU bank CMD said.