RBI’s Q2 monetary policy review: Highlights

Following are the highlights of the RBI’s second quarter review of monetary policy 2013-14:

* Repo or short-term lending rate up by 0.25 per cent to 7.75 per cent.

* Cash reserve ratio unchanged at 4 per cent.

* Marginal standing facility (MSF) rate cut by 0.25 per cent to 8.75 per cent.

* Difference between repo and MSF rate narrows to 1 per cent.

* Repo hiked due to upturn of inflation, other factors.

* Wholesale inflation expected to be higher than current levels; warrants ‘appropriate policy response’.

* Retail inflation to hover around 9 per cent.

* Food price pressures may ease with the arrival of summer crop harvest and seasonal moderation.

* Prospect of delay in taper of US Fed Reserve’s bond purchases has brought calm to financial markets.

* Normalcy will be restored in the forex market only when OMCs fully return to the market for their demand.

* FY14 GDP growth estimate revised downward to 5 per cent vs. 5.7 per cent.

* Growth likely to pick up in second half on good show in exports and agriculture.

* Liquidity pressures building on small businesses as large entities holding on payments; remedies lie in speeding-up of Government and PSU payments.

* Average drawdown from MSF has declined to Rs 0.4 trillion by mid-Oct, down from a high of Rs 1.4 trillion in mid-Sep

* Final guidelines on unhedged forex exposures by corporates to be out by December

* Jalan panel on new bank licenses to hold first meet on Nov 1, decision of RBI on in-principle approvals will be final.

Source: thehindubusinessline