banking news

Banking Sector – RBI policy
As part of its second quarterly review of the monetary policy for 2009-10, the RBI, on October 27, 2009, hiked the Statutory Liquidity Ratio (SLR) for scheduled commercial banks to 25 per cent from 24 per cent of their net demand and time liabilities (NDTL), with effect from November 7, 2009, even as other key rates were left untouched.
RBI Governor D. Subbarao noted that the Indian economy was awash with liquidity and there was possibility of considerable strain in the future from inflationary pressures. However, to keep growth on track, the apex bank left the Bank Rate untouched at 6 per cent while the repo rate under the liquidity adjustment facility (LAF) stay at 4.75 per cent. The reverse repo rate under the LAF, too, remains the same at 3.25 per cent. The cash reserve ratio (CRR) of scheduled banks also has been retained at 5 per cent of their net demand and time liabilities (NDTL).
Mr Subbarao pointed out that the global economy has shown signs of major improvement since the last review in July 2009. However, concerns remained of the recovery being fragile. “Even as output is reviving, unemployment is expected to increase to over 10 per cent. Investment is also expected to remain weak due to ruptured balance sheets, excess capacity and financing constraints. Bank collapses are continuing. World trade still remains below its level a year ago. On balance, while global economic prospects have improved, uncertainties remain about the pace and sustainability of economic recovery,” Subbarao said.
The RBI chief also noted that there were concerns of large government market borrowings. “During 2009-10 so far, the Central Government has already completed over 80 per cent (Rs 3,19,911 crore) of its net market borrowing and State governments have mobilised Rs 58,683 crore (net) through the market borrowing programme,” he stated.
Highlights :
Repo rate retained at 4.75 pc
Reverse repo rate at 3.25 pc
Cash Reserve Ratio kept at 5 pc
Bank rates same at 6 pc
Provisioning requirement for realty up at 1 pc from 0.40 pc
Retains GDP growth projection for FY’10 at 6 pc
Industrial production may revive further in coming months
Ups inflation projection to 6.5 pc by March-end, from 5 pc
Third quarterly review in January