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Highlights: third quarter review of monetary policy

Highlights of the third quarter review of the monetary policy unveiled by the Reserve Bank of India on Tuesday.

business Updated: Jan 24, 2012 12:54 IST


The following are the highlights of the third quarter review of the monetary policy unveiled by the Reserve Bank of India on Tuesday:

- Cash reserve ratio lowered by 50 basis points to 5.5% from 6%

- This step will release Rs.320 billion into the system

- Reduction can be viewed as a reinforcement of the guidance that future rate actions will be towards lowering them

- Repurchase rate, or short-term lending rate, retained at 8.5%

- Reverse repurchase rate, or short-term borrowing rate, stands at 7.5%

- Bank rate untouched at 6%

- Growth slowing due to uncertain global environment, cumulative impact of past monetary policy tightening and domestic policy uncertainties

- Projection on growth lowered to 7% from 7.6% for current fiscal

- Moderation in inflation reflects sharp deceleration in prices of seasonal food items

- Inflation in protein-based food items and non-food manufactured products still high

- Upside risks to inflation arise from global crude oil prices, rupee depreciation and slippage in fiscal deficit

- Inflation projected to moderate to 7% by March-end

- Intention to maintain interest rate environment that moderates inflation

- Policy also tuned to manage risk of falling growth

- Measures intended to manage liquidity to ensure it remains in moderate deficit, consistent with effective monetary transmission

- Forthcoming budget should concentrate on fiscal consolidation

- Administrative actions should induce investment for alleviating supply constraints in food, infrastructure

- Next mid-quarter review of monetary policy March 15

- Monetary policy for 2012-13 will be on April 17

First Published: Jan 24, 2012 12:34 IST

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