RBI's Second Quarter Review of Monetary Policy 2012-13 - 30th Oct 2012
IV. Monetary Measures
47. On the basis of current assessment and in line with the policy stance outlined in Section III, the Reserve Bank announces the following policy measures:
Cash Reserve Ratio
48. It has been decided to:
reduce the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.5 per cent to 4.25 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning November 3, 2012.
49. As as result of this reduction in the CRR, around `175 billion of primary liquidity will be injected into the banking system.
50. The policy repo rate under the liquidity adjustment facility (LAF) has been retained at 8.0 per cent.
Reverse Repo Rate
51. The reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, stands at 7.0 per cent.
Marginal Standing Facility (MSF) Rate
52. The Marginal Standing Facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, stands at 9.0 per cent.
53. The Bank Rate stands at 9.0 per cent.
54. The reduction in the CRR is intended to pre-empt a prospective tightening of liquidity conditions, thereby keeping liquidity comfortable to support growth. It anticipates the projected inflation trajectory which indicates a rise in inflation before easing in the last quarter. While risks to this trajectory remain, the baseline scenario suggests a reasonable likelihood of further policy easing in the fourth quarter of 2012-13. The above policy guidance will, however, be conditioned by the evolving growth-inflation dynamic.
55. These actions and the guidance that is given are expected to:
i. enable liquidity conditions to facilitate a turnaround in credit growth to productive sectors so as to support growth;
ii. reinforce the growth stimulus of the policy actions announced by the Government as inflation risks moderate; and
iii. anchor medium-term inflation expectations on the basis of a credible commitment to low and stable inflation
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