statement follows the pattern already set in the previous
years both in outline and substance.
growth projection for 2004-05 placed in the range
of 6.0-6.5 percent as against the earlier expectation
of 6.5-7.0 per cent.
inflation, as measured by point-to-point variations
in the wholesale price index, rose from 4.6 per cent
at end-March to 8.3 per cent in end-August but has
since come down to 7.1 per cent by October 9, 2004.
point-to-point inflation rate based on WPI for the
year 2004-05 is projected at around 6.5 per cent for
policy purposes as against of 5.0 per cent projected
supply (M3) growth in this fiscal year (up to October
1, 2004) lower at 5.4 per cent as compared with 7.8
per cent in the previous year.
expansion of money supply (M3) for 2004-05 retained
at 14.0 per cent.
robust increase in non-food credit by 11.5 per cent
in this fiscal year (up to October 1, 2004) as compared
with an increase of 6.0 per cent in the previous year.
Central Government has completed gross market borrowings
of Rs.75,044 crore in the fiscal year (up to October
21, 2004), which is 49.8 per cent of the budgetary
Central Government has completed net market borrowings
of 29.0 per cent of the budgeted amount up to October
market borrowing programme in the remaining part of
the year needs to be calibrated carefully in view
of strong credit demand.
markets have remained generally stable though the
government securities market tended to show some nervousness
in recent months.
market interest rates have displayed some upward movement,
particularly at the longer end.
advised to prepare themselves to implement the capital
charge for market risk as envisaged under Basel II
norms in a phased manner by end-March 2006.
global economic recovery is gaining strength, there
is some increase in downside risk primarily on account
of persistence of uptrend in global oil prices.
exchange rate of the rupee depreciated vis-à-vis
US dollar, Euro, Pound sterling and Japanese yen by
October 21, 2004.
exchange reserves increased by US $ 7.6 billion from
US $ 113.0 billion at end-March 2004 to US $ 120.6
billion as on October 21, 2004.
exports during April-September 2004 increased by 24.4
per cent in US dollar terms, while imports rose faster
by 34.3 per cent. The higher trade deficit reflects
high oil imports bill as also the growth in overall
current account remained in surplus consecutively
over the past three years, the current account in
the first quarter of 2004-05 also posting a surplus
of US $ 1.9 billion.
pick-up in investment activity and significant growth
in non-food credit appear to be broad based and are
not temporary phenomena.
the magnitude and persistence of supply shock was
partly unanticipated, demand management seems to invite
closer attention, particularly for stabilising inflationary
expectations in a credible manner.
the Reserve Bank will continue to pursue stability,
the markets should be prepared for the uncertainties.
for the rest of the year would broadly remain the
same as in the first half of the year with equal weight
being given to maintaining growth momentum and stabilizing
Stance of Monetary Policy
overall stance of monetary policy for 2004-05 will
be provision of appropriate liquidity to meet credit
growth and support investment and export demand in
the economy, while placing equal emphasis on price
to pursue an interest rate environment that is conducive
to macroeconomic and price stability, and maintaining
the momentum of growth.
to consider measures in a calibrated manner, in response
to evolving circumstances with a view to stabilising
Financial Sector Reforms and Monetary Policy Measures
Rate kept unchanged at 6.0 per cent.
Rate increased by 25 basis points to 4.75 per cent.
Liquidity Adjustment Facility to operate with overnight
fixed rate repo and reverse repo.
on Interest Rates on NRE Deposits raised by 50 basis
points over US dollar LIBOR/SWAP rates of corresponding
may fix the ceiling on interest rates on FCNR(B) deposits
on monthly basis.
tenor of retail domestic term deposits reduced to
on advances under priority sector enhanced for improving
credit delivery to the agriculture sector.
provisions of service area approach to be dispensed
with except for government sponsored programme.
to increase their disbursements to small and marginal
farmers under special agricultural credit plans (SACP)
by March 2007.
sector banks are urged to formulate SACPs from the
year 2005-06, targeting an annual growth rate of at
least 20-25 per cent.
loan limit for SSI entrepreneurs enhanced from Rs.50
lakh to Rs.1 crore.
by banks in securitised assets pertaining to SSI sector
be treated under priority sector.
may now extend direct finance to housing sector up
to Rs.15 lakh under priority sector lending.
may finance distressed urban poor to prepay their
debt to non-institutional lenders.
to look into the suggestions made by NCAER for the
Kisan Credit Card scheme and take remedial action.
X has been established with a corpus of Rs.8,000 crore
(as announced in the Union Budget for 2004-05).
of the Special Group on Debt Restructuring Mechanism
for Medium Enterprises be placed in public domain.
has constituted Empowered Committees to focus on operational
issues related to better functioning of Regional Rural
Banks and to provide clarifications on regulatory
of the Task Force for reviving the rural co-operative
banking institutions is expected shortly.
are urged to keep up the momentum of lending to agriculture.
finance to NBFCs for second hand assets.
banks announced gold card scheme for exporters.
of Working Group on Credit Enhancement by State Governments
is expected shortly.
move towards pure inter-bank call/notice money market.
minimum maturity period of CP is reduced to 7 days.
to report issuance of CP on the NDS platform by the
end of the day.
to suggest rationalisation and standardisation of
processing, settlement and documentation of CP issuance.
value-free transfer of securities between market participants
and the CCIL facilitated.
Report of the Group on Negotiated Dealing System (NDS)
is being placed in the public domain.
Indexed Bonds to be introduced during the year 2005-06
in consultation with the Government.
Report of the Working Group on Primary Dealers to
be placed before the TAC.
of OTC Derivatives through CCIL expected to be operationalised
by March 2005.
on Corporate Debt is expected to submit its Report
in January 2005.
ceiling on MSS raised from Rs.60,000 to Rs.80,000
study Group to be constituted for strengthening OMO
by ADs for trade credit liberalised.
limit for export realisation relaxed for EOUs.
of forward contracts by exporters/importers relaxed.
internal Group on forex market constituted.
to undertake fresh survey on impact of trade related
would prepare draft guidelines for implementation
of Basel II norms and place them in the public domain.
second Draft Guidelines on Ownership and Governance
will be put in public domain soon.
instructions on "Fit and Proper" criteria
issued to private sector banks.
cases of penalty imposed by RBI as also strictures/directions
arising out of inspection will be placed in the public
risk containment measures prescribed on housing and
to comply with prudential guidelines on non-SLR securities.
norms for classification of doubtful assets for FIs
for supervision of DFIs and large NBFCs proposed.
of credit information by CIBIL for improving asset
quality of banks.
constitute a Working Group on conflicts of interest
in the Indian financial services sector.
vision document for the future role of UCBs is being
Standing Advisory Committee on UCBs chaired by Deputy
Governor, RBI would meet on a quarterly basis in future.
guidelines on road map for RNBCs would be issued.
Finance Companies encouraged to consider phasing out
their public deposits consistent with international
of Capital Base for Asset Reconstruction Companies
to 15 per cent of assets acquired or Rs. 100 crore,
whichever is less.
Report of the Technical Group on Refinancing Institutions
is expected by December 2004.
first lot of the data series under CDBMS to be released
on November 1, 2004.
draft vision document on Payment and Settlement System
be placed in the public domain for feedback and discussions.
draft regulation to set up the Board for Payment and
Settlement Systems submitted to the Government for
notification in the Gazette.
national settlement system is expected to be operationalised
in early 2005.
constitute a Working Group on risk mitigation for
Indian retail payment system to submit its Report
by November 2004.
per transaction limits for ECS and EFT being dispensed
with effective November 1, 2004.
Group for regulatory mechanism for cards to be constituted.
to grant refunds up to Rs.25,000 through Electronic
Clearing System (ECS) facility at select centres.
High Powered Committee constituted for streamlining
the systems and procedures for transmission of data
on excise duty and service tax.
revised draft report on International Financial Standards
and Codes is being placed in the public domain.
also see : (Click
here for details)