Second Quarter Review of Monetary Policy 2009-2010
-Announced on the 27th October 2009
III. Monetary Measures
93. The Bank Rate has been retained unchanged at 6.0 per cent.
94. The repo rate under the Liquidity Adjustment Facility (LAF) has been retained unchanged at 4.75 per cent.
Reverse Repo Rate
95. The reverse repo rate under the LAF has been retained unchanged at 3.25 per cent.
96. The Reserve Bank has the flexibility to conduct repo/reverse repo auctions at a fixed rate or at variable rates as circumstances warrant.
97. The Reserve Bank retains the option to conduct overnight or longer term repo/reverse repo under the LAF depending on market conditions and other relevant factors. The Reserve Bank will continue to use this flexibly including the right to accept or reject tender(s) under the LAF, wholly or partially, so as to make efficient use of the LAF in daily liquidity management.
Cash Reserve Ratio
98. The cash reserve ratio (CRR) of scheduled banks has been retained unchanged at 5.0 per cent of their net demand and time liabilities (NDTL).
99. The collateralised borrowing and lending obligation (CBLO) liabilities of scheduled banks were exempted from CRR prescription in order to develop CBLO as a money market instrument. Volumes in the CBLO segment have increased over the years, especially after the phasing out of the non-banks from the inter-bank market. The daily average volume in the CBLO segment, which was only Rs.6 crore in January 2003, is now over Rs.60,000 crore. Since the objective of developing CBLO as a money market instrument has been broadly achieved, it is proposed that:
• liabilities of scheduled banks arising from transactions in CBLO with Clearing Corporation of India Ltd. (CCIL) will be subject to maintenance of CRR with effect from the fortnight beginning November 21, 2009.
Statutory Liquidity Ratio
100. In view of difficult macroeconomic situation and liquidity conditions in the global and domestic financial markets after the collapse of Lehman Brothers, the statutory liquidity ratio (SLR) of scheduled commercial banks (SCBs) was reduced from 25 per cent to 24 per cent of their NDTL with effect from November 8, 2008. The liquidity situation has remained comfortable since mid-November 2008 as reflected in the surplus funds being placed by banks daily in the LAF window of the Reserve Bank. Accordingly, it has been decided to:
• restore the SLR for scheduled commercial banks to 25 per cent of their NDTL with effect from the fortnight beginning November 7, 2009.
101. SCBs are currently maintaining SLR investments at 27.6 per cent of their NDTL, net of LAF collateral securities, and 30.4 per cent of NDTL, inclusive of LAF collateral securities. As such, the increase in the SLR will not impact the liquidity position of the banking system and credit to the private sector.
Third Quarter Review
102. The Third Quarter Review of Monetary Policy for 2009-10 will be undertaken on January 29, 2010.
Second Quarter Review of Monetary Policy 2009-2010... click here
Highlights of 2nd Quarter Review of Monetary Policy 2009-2010... click here
RBI CREDIT AND MONETARY POLICIES (1999-2010)... click here