Highlights-Mid-Term Review of the Annual Policy Statement for 2008-09, RBI Credit Policy, Reserve Bank of India: Banknet India

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Highlights of Mid-Term Review of the Annual Policy Statement for 2008-09- October 24, 2008

Credit Delivery Mechanism and Other Banking Services

Consequent upon announcements made in the Union Budgets for the years 2007-08 and 2008-09, public sector banks, RRBs and rural co-operative banks advised to grant interest rate subvention of 2 per cent per annum to farmers in respect of short-term production credit up to Rupees three lakh.

Reserve Bank to provide a sum of Rs.25,000 crore as the first instalment under the Agricultural Debt waiver and Debt Relief Scheme 2008 as temporary liquidity support under Section 17(3-B) and Section 17(4-E) of the RBI Act to scheduled banks and the NABARD, respectively, till November 3, 2008.

All-in-cost ceiling for trade credit less than 3 years enhanced to 6 months LIBOR plus 200 basis points.

Detailed guidelines to banks on rehabilitation of potentially viable sick SME units to be issued by end-November 2008.

RRBs to be allowed greater flexibility in opening new branches as long as they are making operational profits and their financials are improving.

Feedback to be given to banks to make the process of financial inclusion more effective.

Recommendations of the Special Task Force to give a fresh impetus for setting up of banking facilities at additional centres in the North-Eastern region are under implementation.

A Model Scheme for Financial Literacy and Credit Counselling Centres to be notified.

Report of High Level Committee constituted to review the Lead Bank Scheme and improve its effectiveness to be submitted by December 2008.

Study on Courier/Postage charges levied by banks for collection of outstation cheques and for sending statements/cheque books to customers to be placed on Reserve Bank’s website.

Institutional Developments

The Payment and Settlement Systems Act, 2007 and the Payment and Settlement Systems Regulations, 2008 notified and have come into effect from August 12, 2008.

Operating guidelines for mobile payments issued for adoption by banks under Section 18 of the Payment and Settlement Systems Act, 2007 with effect from October 8, 2008.

Existing exemption to Non-scheduled UCBs in Tier I regarding maintaining SLR not to exceed 7.5 per cent of NDTL with effect from October 1, 2009 and the exemption to be withdrawn effective from April 1, 2010.

Non-scheduled UCBs in Tier I to maintain SLR in the form of Government and other approved securities not less than 7.5 per cent of their NDTL by September 30, 2009 and 15 per cent of their NDTL by March 31, 2010.

Current prescription of holding SLR in Government and other approved securities not less than 15 per cent of their NDTL in respect of non-scheduled UCBs in Tier-II to continue up to March 31, 2010.

From March 31, 2011 onwards all UCBs (non-scheduled and scheduled) to maintain SLR in Government and other approved securities up to 25 per cent of their NDTL.

Advisory Panel Reports and the overview report of the Committee on Financial Sector Assessment (CFSA) to be released by December 2008.

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