Monetary Policy 2003-04: Highlights

By Our Banking Bureau | 29 Apr 2003

Mumbai: The highlights of the Monetary Policy 2003-04 announced today:

• Gross domestic growth (GDP) growth in 2003-04, assuming satisfactory spatial distribution of monsoon, projected at about 6.0 per cent.
  
• Bank Rate reduced by 0.25 percentage points.
  
• Cash reserve ration (CRR) reduced by 0.25 percentage points.
  
• Inflationary situation on an average basis remained low except in the fourth quarter during 2002-03 despite drought. Inflation is expected to be in the range of 5.0 to 5.5 per cent during 2003-04.
  
• Lower increase in reserve money despite sharp increase in the Reserve Bank of India's (RBI) foreign currency assets.
  
• Money Supply (M3) remained within projected trajectory during 2002-03 and projected at 14.0 per cent for 2003-04.
  
• Sustained increase in credit flow during 2002-03; non-food credit to increase by 15.5 to 16.0 per cent during 2003-04.
  
• Sharp reduction in interest rates of banks and in government and corporate papers.
  
• Government borrowing programme completed at lower interest cost with longer maturity. Interest rates on corporate paper are at an all-time low.
  
• Reserves build-up at a low-effective cost without adding to external debt.
  
• Low interest rates and strong forex position prompts prepayment of external debt.
  
• RBI to provide adequate liquidity to meet credit growth and support investment demand.
  
• Preference for a soft and flexible interest rate environment to continue.
  
• Export credit refinance facility to continue.
  
• Interest rate on backstop facility reduced.
  
• Transparent system to determine the prime lending rate (PLR) of banks.
  
• Uniformity in maturity structure of repatriable foreign currency as well as rupee non-resident Indian (NRI) deposits.
  
• Overseas investments liberalised and flexibility allowed to overseas investors for flow of foreign direct investment (FDI).
  
• Further measure to improve credit delivery mechanism to priority sector.
  
• Changes in prudential measures for UCBs in line with JPC recommendations.