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click here to return to main page of Highlights of Annual Policy Statement 2005-06



Highlights of Annual Policy Statement for the Year 2005-06

Developmental and Regulatory Policies

Status quo on the administered interest rates on (i) savings deposit accounts, (ii) non-resident Indian (NRI) deposits, (iii) small loans up to Rs.2 lakh and (iv) export credit.

Effective June 11, 2005, non-bank participants would be allowed to lend up to 10 per cent of their average daily lending in call/notice money market during 2000-01.

Effective August 6, 2005, non-bank participants would be completely phased out from the call/notice money market.

Effective April 30, 2005, the benchmark for fixing prudential limits on exposures to call/notice money market in the case of scheduled commercial banks would be linked to their capital funds (sum of Tier I and Tier II capital).

From April 30, 2005, all NDS members are required to report their term money deals on NDS platform.

A screen-based negotiated quote-driven system for all dealings in call/notice and term money market transactions is proposed.

An electronic trading platform for conduct of market repo operations in government securities, in addition to the existing voice based system to be facilitated.

Participation in market repo facility in government securities for non-scheduled urban co-operative banks (UCBs) and listed companies having gilt accounts with scheduled commercial banks will be allowed subject to eligibility criteria and safeguards.

The minimum maturity period of certificates of deposit (CDs) reduced from 15 days to 7 days with immediate effect.

Consolidation of debt and building up of large liquid securities in consultation with the Government while continuing the programme of reissuances.

Post-FRBM, functional separation between debt management and monetary operations within RBI. For this purpose, RBI will have discussions with market players on the modalities and procedures of market operations.

The settlement system for transactions in government securities will be standardised to T+1 basis.

The Reserve Bank would continue to resort to multiple and uniform price methods flexibly in the auction of government securities.

Expansion of PD business structure to include banks which fulfil certain minimum criteria subject to safeguards and in consultation with banks, PDs and the Government.

To permit sale of government securities allotted in primary issues with and between CSGL account holders also on the same day.

Following the recommendation of the Twelfth Finance Commission, RBI would facilitate the smooth transition of States' market borrowing through consultation with the Central and the state governments.

Cancellation and rebooking of all eligible forward contracts booked by residents, irrespective of tenor, to be allowed.

Banks to be allowed to approve proposals for commodity hedging in international exchanges from their corporate customers.

The closing time for inter-bank foreign exchange market in India to be extended by one hour up to 5.00 p.m.

To raise the ceiling of overseas investment by Indian entities in overseas joint ventures and/or wholly owned subsidiaries from 100 per cent to 200 per cent of their net worth under the automatic route.

To accord general permission to ADs to open foreign currency accounts of the project offices set up in India by foreign companies and operate the accounts flexibly.

RBI has set up an Expert Group to formulate strategy for increasing investment in agriculture.

It is proposed to conduct a survey to assess customer satisfaction on credit delivery in rural areas by banks with the help of an outside agency.

It is proposed to increase the limit on loans to farmers through the produce marketing scheme from Rs.5 lakh to Rs.10 lakh under priority sector lending.

Banks are urged to continue their efforts to step up credit to agriculture.

The Reserve Bank has enabled NGOs to access ECBs up to US $ 5 million during a financial year for permitted end-use, under automatic route.

As a follow-up of the Budget proposals, modalities for allowing banks to adopt the agency model for providing credit support to rural and farm sectors and appointment of MFIs as banking correspondents are being worked out.

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