Bill seeks to allow RBI fix SLR sans 25 per cent floor
09 Mar 2007
Mumbai: Finance minister P Chidambaram has introduced in the Lok Sabha the Banking Regulation (Amendment) Bill, 2007. The bill is aimed at allowing more operational flexibility to the Reserve Bank of India in the conduct of monetary policy, t he minister said.
The bill seeks to amend section 24 of the Banking Regulation Act, 1949 to enable the RBI to specify the statutory liquidity ratio without any floor rate.
As such, the existing floor of 25 per cent has to be removed keeping intact the ceiling of 40 per cent as the guidance for RBI. It will give more operational flexibility to RBI in the conduct of monetary policy, Chidambaram said.
The bill also seeks to amend section 53 of the Banking Regulation Act, 1949 to enable RBI specify the statutory liquidity ratio without any floor, particularly in special economic zones (SEZs).
Chidambaram said it was necessary that the RBI, as the regulator and the authority vested with the powers to conduct monetary policy, has the necessary flexibility regarding stipulation of holding of liquid instruments by banks.
The government wants to moderate inflation without hurting robust economic growth and it supports the RBI measures to curb price pressures, he said.
India's economy is expected to grow at over 9 per cent in the current fiscal ending March 31. But the growth, which has averaged 8.3 per cent in the last three fiscal years, has accelerated annual inflation to above 6 per cent causing unease to large sections of India's huge population.
Inflation based on the wholesale price index, meanwhile, firmed up to 6.10 per cent during the week ended February 24 from 6.05 per cent the week before, official data showed.
The finance minister said the RBI board was in agreement with the stance of the budget, which had cut import duties of most non-farm goods to take tariffs closer to Asian nations and to douse spiraling prices.
In its bid to curb inflation, the government has taken a string of measures, including lowering of fuel prices and import duty cuts on items such as cement and steel.
While the government supports RBI measures to curb price rise, it wants to moderate inflation without hurting economic growth, the finance minister said.
