Third Quarter Review of Monetary Policy 2010-11
-Announced on the 25th January 2011
IV. Policy Measures
47. On the basis of the current assessment and in line with the policy stance as outlined in Section III, the following monetary policy measures are announced.
48. The Bank Rate has been retained at 6.0 per cent.
49. It has been decided to:
increase the repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.25 per cent to 6.5 per cent with immediate effect.
Reverse Repo Rate
50. It has been decided to :
increase the reverse repo rate under the LAF by 25 basis points from 5.25 per cent to 5.50 per cent with immediate effect.
Cash Reserve Ratio
51. The cash reserve ratio (CRR) of scheduled banks has been retained at 6.0 per cent of their net demand and time liabilities (NDTL).
Liquidity Management Measures
52. On the basis of an assessment of the current liquidity situation, it has been decided to extend the following liquidity management measures:
i) The additional liquidity support to scheduled commercial banks under the LAF to the extent of up to one per cent of their net demand and time liabilities (NDTL), currently set to expire on January 28, 2011, is now extended up to April 8, 2011. For any shortfall in maintenance of the SLR arising out of availment of this facility, banks may seek waiver of penal interest purely as an ad hoc measure.
ii) The second LAF (SLAF) will be conducted on a daily basis up to April 8, 2011.
53. The Reserve Bank will constantly monitor the credit growth and, if necessary, will engage with banks which show an abnormal incremental credit-deposit ratio.
54. These actions are expected to:
(i) Contain the spill-over from rise in food and fuel prices to generalised inflation.
(ii) Rein in rising inflationary expectations, which may be aggravated by the structural and transitory nature of food price increases.
(iii) Be moderate enough not to disrupt growth.
(iv) Continue to provide comfort to banks in their liquidity management operations.
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Macroeconomic and Monetary Developments: Third Quarter Review 2010-11
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