Fourth Bi-Monthly Monetary Policy Statement, 2014-15 By Dr. Raghuram G. Rajan, Governor, RBI - September 30, 2014 - Full Text

Part A: Monetary Policy

Monetary and Liquidity Measures

On the basis of an assessment of the current and evolving macroeconomic situation, it has been decided to:

keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent;

keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL);

reduce the liquidity provided under the export credit refinance (ECR) facility from 32 per cent of eligible export credit outstanding to 15 per cent with effect from October 10, 2014;

continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and

continue with daily one-day term repos and reverse repos to smooth liquidity.

Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent.

Assessment - Click here

Policy Stance and Rationale- Click here

Part B: Developmental and Regulatory Policies

13. This part of the Statement reviews the progress on various developmental and regulatory policy measures announced by the Reserve Bank in recent policy statements and also sets out new measures.

14. Developmental and regulatory measures are being put in place within the organising framework of the five-pillar approach announced in October 2013 in the Second Quarter Review of Monetary Policy for 2013-14. This approach emphasises the strengthening of the monetary policy framework; fortifying the banking structure; broadening and deepening financial markets; expanding access to finance; and dealing with stress in corporate and financial assets and putting them back to work.

I. Monetary Policy Framework

15. Efforts to improve the monetary policy framework are documented in Part A of this Statement and in the accompanying Monetary Policy Report. In continuation of the process of implementing recommendations of the Expert Committee to Revise and Strengthen the Monetary Policy Framework (Chairman: Dr. Urjit R Patel), the first issue of the Reserve Bank’s Monetary Policy Report is being placed in the public domain along with this Statement. Steps have also been taken to refine the liquidity management framework with a view to making it flexible, transparent and predictable.

II. Banking and Financial Structure - Click here

III. Financial Markets- Click here

IV. Access to Finance - Click here

RBI Monetary and Credit Policies (1999-2015) - Notifications, Press Releases, Reports - Click here