Credit policy highlights: Bank Rate cut to 6.25 per cent

Mumbai: Key points in the Reserve Bank of India’s Mid-Year Review of Monetary and Credit Policy for the year to March 2003, announced today.

• Bank Rate cut to 6.25 per cent from 6.5 per cent, with effect from the close of business on Tuesday, October 29.
• Repo rate cut to 5.5 per cent from 5.75 per cent, with effect from Wednesday, October 30. The repo rate is the rate at which the central bank borrows and lends overnight funds.
• Cash reserve ratio cut to 4.75 percent from five percent, with effect from November 16, 2002.
• GDP growth for the year lowered to 5-5.5 per cent from the earlier projection of 6-6.5 per cent.
• Inflation rate for the year likely to be around 4 per cent.
• Agricultural output likely to fall by around 1.5 per cent this year.
• Substantial increase in flow of bank credit to industries. Upturn in industrial production and buoyancy in exports to sustain growth
• Money supply (M3) contained within the projected trajectory of 14 per cent.
• Decline in reserve money despite large increase in foreign exchange reserves and significant primary support to government borrowing programme.
• Bulk of the government borrowing programme completed at lower interest cost and with longer maturity.
• Sharp reduction in interest rates on various types of government and corporate papers.
• Reduction in effective lending rates of banks.
• Reserves build up at a low effective cost without adding to external debt. The increase in reserves reflects higher remittances, quicker repatriation of export proceeds and non-debt inflows.
• RBI to continue the monetary policy stance for 2002-03 announced in April 2002 for the remaining half of the year.
• Monetary and prudential measures towards flexibility