RBI''s mid-year review of monetary and credit policy

The Reserve Bank of India governor, Bimal Jalan presented the mid-year review of the monetary and credit policy measures to bank chairmen for the year 1999-2000.

CRR - The cash reserve ratio has been reduced to nine per cent, a reduction of one percentage point. This is a clear indication from the RBI that it wants interest rates to climb further down. Banks have been exempted from adhering to the cash reserve ratio requirements for deposits collected through the foreign currency non-resident (FCNR) scheme. These two measures will release around Rs.8,060 crore worth liquidity into the system

Interest rates - The 30 per cent interest rate surcharge on import finance has been done away with. The RBI has also removed the 20 per cent minimum interest rate limit on export bills that are overdue. Banks are now free to charge interest on overdue bills as they wish to. Banks will also be allowed to lend below their prime lending rates in a few sectors.

Mutual Funds - Mutual funds have been allowed to conduct interest rate swap and forward rate agreement operations with banks, financial institutions and primary dealers. The money market mutual funds will come under the purview of the Securities and Exchange Board of India. Banks that set up money market mutual funds have to set up a separate trust.

Gilt and income funds of mutual funds can now take advantage of the cheque writing facility. Thus, mutual funds can now almost compete with commercial banks for deposits.

FDI - Henceforth, companies that raise funds or issue shares to foreign collaborators through the automatic approval mechanism, need not seek RBI permission.