of the Annual Monetary Policy Statement news
|18 May 2004
broadly follows the pattern already set in the previous
growth for 2004-05 projected at 6.5-7.0 per cent.
no significant supply shocks and appropriate management
of liquidity, the inflation rate projected for policy
purposes at around 5.0 per cent during 2004-05.
in reserve money and Money supply (M3) were higher during
2003-04 reflecting capital inflows; the expansionary
impact of foreign currency assets, however, was neutralised
to a large extent by substantial open market operation
(OMO) including sustained repo operations under LAF.
pick-up in non-food credit since September; total flow
of resources to the commercial sector was higher than
market borrowing programme in 2003-04 completed at a
much lower cost; while noting reduction in fiscal deficit,
need to step up capital expenditure stressed.
reduction in interest rates in money and government
securities markets observed in 2003-04.
sector banks have reduced their BPLR in the range of
25-100 basis points.
to continue with its policy of active liquidity management;
Market Stabilisation Scheme (MSS), is an additional
economic recovery has broadened and strengthened faster
than expected despite some uncertainties.
exchange rate of the rupee appreciated vis-à-vis
US dollar but depreciated against the Euro, Pound sterling
and Japanese yen in 2003-04.
foreign exchange reserves increased by US $ 37.6 billion
during fiscal 2003-04 and are at US $ 118.6 billion
by May 7, 2004.
exports in US dollar terms increased by 17.1 per cent
while imports by 25.3 per cent; the current account
expected to register surplus during 2003-04 for the
third year in succession.
rate management, as in the past, based on flexibility,
without a fixed or pre-announced target, but with ability
most distinguishing feature of the external sector during
2003-04 relates to the large capital flows with its
inevitable implications for the conduct of domestic
monetary policy and exchange rate management.
uncertainties, Indias position among the top performers
globally in terms of GDP growth is expected to continue
regards prices, despite overhang of problems on account
of oil prices and large domestic liquidity, price situation
unlikely to cause concern to macro stability during
to overcome the bottlenecks in flow of bank credit to
agriculture and small & medium enterprises emphasised.
of rural banking sector stressed for enhancing the quality,
purposiveness and reach of banking in India.
the Reserve Bank will continue to provide a policy environment
that avoids excessive and destabilizing volatility as
a public good, market participants were urged to take
into account the portfolio risks arising from any unexpected
developments and provide adequately for them.
outlook for the external sector accords comfort to the
conduct of public policies.
of Monetary Policy
management during 2003-04 broadly in conformity with
the stance of the policy set out for the year.
expansion of money supply (M3) at 14.0 per cent with
credit growth by 16.0-16.5 per cent during 2004-05.
uncertainties including geopolitical risks impacting
on international oil economy reckoned while designing
the stance of monetary policy. As such, the inflationary
situation needs to be watched closely and there could
be no room for complacency on this count.
overall stance of monetary policy for 2004-05 will be:
(i) provision of adequate liquidity to meet credit growth
and support investment and export demand while keeping
a very close watch on the movements in the price level.
(ii) Consistent with the above, while continuing with
status quo, RBI to pursue an interest rate environment
that is conducive to maintaining momentum of growth
and, macroeconomic and price stability.
Rate kept stable at 6.0 per cent.
Rate unchanged at 4.5 per cent.
LAF scheme operationalised.
entire export credit refinance was made available at
reverse repo rate.
all banks have adopted the new system of BPLR and the
rates are lower from their earlier PLRs.
are encouraged to align the pricing of credit to assessment
of credit risk to improve credit delivery and credit
accepted some recommendations of the interim Report
of Vyas Committee for implementation, e.g., loans for
storage facilities under priority sector, securitised
agricultural loans as priority sector lending, waiving
margin/security requirements for certain agricultural
loans up to a limit, NPA norms for crops loans aligned
to crop seasons.
of mechanism for debt restructuring for medium enterprises
on the lines of corporate debt restructuring.
of infrastrucutre lending broadened.
Group constituted on Credit Enhancement by State Governments
for financing infrastructure.
Gold Card Scheme for creditworthy exporters drawn up.
restructuring options being considered by the Government
and other stakeholders for rationalising the structure
of RRBs - Vyas Committee is also looking into restructuring
on the lending of non-bank participants in the call/notice
money market reduced to 45 percent effective June 26,
value-free transfer of securities proposed between market
participants and the CCIL under CBLO.
constituted Working Group to review the performance
of negotiated dealing system (NDS).
of OTC derivatives through CCIL being considered.
to work out arrangement for settlement of trades in
non-SLR debt instruments for NDS members.
paper on Capital Indexed Bonds being put in public domain.
ECB limit already enhanced to US $ 500 million under
the automatic route for investment in the real sector.
individuals already permitted to remit freely up to
US $ 25,000 per calendar year.
corporates and partnership firms allowed to invest overseas
upto 100 per cent of their net worth.
allowed to raise long-term bonds to finance infrastructure.
extant limit on unsecured exposures for banks withdrawn.
on all public financial institutions (PFIs) to attract
a risk weight of 100 per cent.
required to maintain capital charge for market risk
in a phased manner.
to draw a road map for migration to Basel II.
to make higher provisioning according to the age of
to provide credit information to CIBIL.
to fully adhere to the KYC policy for opening new accounts.
of the Working Group on Financial Conglomerates is being
put in public domain.
based supervision extended to more banks.
licences to UCBs only after a comprehensive policy.
of the Working Group on Development Finance Institutions
is being put in public domain.
Group to evaluate the regulatory and supervisory systems
deployed by refinancing institutions (RFIs).
of service charges on banks for electronic funds transfer
and electronic clearing services.
sets up a Board for Payment and Settlement Systems.
expects most commercial banks to join the RTGS system
by June 2004.
Working Group on Electronic Funds Transfer for Capital
window services for all transactions in RBI cash department.
of On-line Tax Accounting System by June 2004.
Committee on Procedures and Performance Audit on Public
Services has submitted four Reports, being put in the
recommendations of the Advisory/Technical Groups on
International Financial Standards and Codes are being