Monetary Policy 2003-04: Highlights

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.