From : E-Group, STC, Salt Lake, Kolkata Dear Member, Kindly double click on the enclosed attachment to read it. With regards, Anup Sen, Moderator E-Group, STC, Salt Lake, Kolkata email : stcsaltlake@xxxxxxxx Using Internet Explorer in ATM PC of your branch, please browse http://10.128.74.200 (our Intranet Web-Site). We have provided lots of Reading Materials for you at the site. Happy browsing! We shall be glad to receive your feedbacks through emails regarding the mails being sent to you through this e-group. This message is intended only for the use of the Addressee and may contain information that is PRIVILEGED and CONFIDENTIAL. If you are not the intended recipient, dissemination of this communication is prohibited. If you have received this communication in error, please erase all copies of the message and its attachments and kindly arrange to notify stcsaltlake@xxxxxxxx immediately.Title: State Bank of India, Staff Training Centre, Salt Lake, Kolkata. : : stcsaltlake@xxxxxxxx : :
Stance of
Monetary Policy Ø Monetary management during 2003-04
broadly in conformity with the stance of the policy set out for the year. Ø Projected expansion of money supply (M3)
at 14.0 per cent with credit growth by 16.0-16.5 per cent during 2004-05. Ø Noticeable uncertainties including
geopolitical risks impacting on international oil economy reckoned while
designing the stance of monetary policy. As such, the inflationary situation
needs to be watched closely and there could be no room for complacency on this
count. The overall policy stance for 2004-05
will be: (i)
Provision of adequate liquidity to meet credit growth and support
investment and export demand while keeping a very close watch on movements in
the price level. (ii)
Consistent with the above, while continuing with status quo, RBI to
pursue an interest rate environment that is conducive to maintaining the
momentum of growth and, macroeconomic and price stability. Measures Ø Bank Rate kept stable at 6 per cent. Ø Repo Rate unchanged at 4.5 per cent. Ø Revised LAF scheme operationalised. Ø The entire export credit refinance made
available at reverse repo rate. Ø Almost all banks have adopted the new
system of BPLR and the rates are lower from their earlier PLRs. Ø Banks are encouraged to align the
pricing of credit to assessment of credit risk to improve credit delivery and
credit culture. Ø The RBI accepted some recommendations of
the interim report of the Vyas Committee for implementation such as loans for
storage facilities under priority sector, securitised agricultural loans as
priority sector lending, waiving margin/security requirements for certain
agricultural loans up to a limit, NPA norms for crop loans aligned to crop
seasons. Ø Development of mechanism for debt
restructuring for medium enterprises on the lines of corporate debt restructuring.
Ø Definition of infrastructure lending
broadened. Ø Working group constituted on Credit
Enhancement by State governments for financing infrastructure. Ø A Gold Card Scheme for creditworthy
exporters drawn up. Ø Various restructuring options being
considered by the Government and other stakeholders for rationalising the
structure of RRBs ? the Vyas Committee is also looking into restructuring of
RRBs. Ø Limit on lending of non-bank
participants in the call/notice money market reduced to 45 per cent effective
June 26, 2004. Ø Automated value-free transfer of
securities proposed between market participants and the CCIL under CBLO. Ø RBI constituted working group to review
the performance of negotiated dealing system (NDS). Ø Clearing of OTC derivatives through CCIL
being considered. Ø CCIL to work out arrangement for
settlement of trades in non-SLR debt instruments for NDS members. Ø Discussion paper on Capital Indexed
Bonds being put in public domain. Ø The ECB limit already enhanced to $500
million under the automatic route for investment in the real sector. Ø Resident individuals already permitted
to remit freely up to $25,000 per calendar year. Ø Indian corporates and partnership firms
allowed to invest overseas up to 100 per cent of their net worth. Ø Banks allowed to raise long-term bonds
to finance infrastructure. Ø The extant limit on unsecured exposures
for banks withdrawn. Ø Exposures on all public financial
institutions (PFIs) to attract a risk weight of 100 per cent. Ø Banks required to maintain capital
charge for market risk in a phased manner. Ø Banks to draw a road map for migration
to Basel II. Ø Banks to make higher provisioning
according to the age of NPAs. Ø Banks/FIs to provide credit information
to CIBIL. Ø Banks to fully adhere to the KYC policy
for opening new accounts. Ø Report of the Working Group on Financial
Conglomerates being put in public domain. Ø Risk based supervision extended to more
banks. Ø Fresh licences to UCBs only after a
comprehensive policy. Ø Report of the Working Group on
Development Finance Institutions being put in public domain. Ø Technical Group to evaluate the
regulatory and supervisory systems deployed by refinancing institutions (RFIs).
Ø Waiver of service charges on banks for
electronic funds transfer and electronic clearing services. Ø RBI sets up a Board for Payment and
Settlement Systems. Ø RBI expects most commercial banks to
join the RTGS system by June 2004. Ø A Working Group on Electronic Funds
Transfer for Capital Market constituted. Ø Single window services for all
transactions in RBI cash department. Ø Operationalisation of On-line Tax
Accounting System by June 2004. Ø Standing Committee on Procedures and
Performance Audit on Public Services has submitted four reports, being put in
the public domain. Ø The recommendations of the
Advisory/Technical Groups on International Financial Standards and Codes being
pursued. Domestic developments Ø GDP growth for 2004-05 projected at
6.5-7 per cent. Ø Assuming no significant supply shocks
and appropriate management of liquidity, the inflation rate projected for
policy purposes at around 5 per cent during 2004-05. Ø Growth in reserve money and money supply
(M3) was higher during 2003-04 reflecting capital inflows; the expansionary
impact of foreign currency assets, however, was neutralised to a large extent
by substantial open market operation (OMO) including sustained repo operations
under LAF. Ø Sustained pick-up in non-food credit
since September; total flow of resources to the commercial sector was higher
than in the previous year. Ø Government's market borrowing programme
in 2003-04 completed at a much lower cost; while noting reduction in fiscal
deficit, need to step up capital expenditure stressed. Ø Further reduction in interest rates in
money and government securities markets observed in 2003-04. Ø Public sector banks have reduced their
BPLR in the range of 25-100 basis points. Ø RBI to continue with its policy of
active liquidity management; Market Stabilisation Scheme (MSS) is an additional
tool. External developments Ø Global economic recovery has broadened
and strengthened faster than expected despite some uncertainties. Ø The exchange rate of the rupee
appreciated vis-a-vis U.S. dollar but depreciated against the Euro, pound
sterling and Japanese yen in 2003-04. Ø India's foreign exchange reserves
increased by $37.6 billion during fiscal 2003-04 and were at $118.6 billion by
May 7, 2004. Ø India's exports in dollar terms
increased by 17.1 per cent and imports by 25.3 per cent; the current account
expected to register surplus during 2003-04 for the third year in succession. Ø Exchange rate management, as in the
past, based on flexibility, without a fixed or pre-announced target, but with
ability to intervene. Ø The most distinguishing feature of the
external sector during 2003-04 relates to the large capital flows with its
inevitable implications for the conduct of domestic monetary policy and
exchange rate management. Overall assessment Ø Despite uncertainties, India's position
among the top performers globally in terms of GDP growth is expected to
continue during 2004-05. Ø As regards prices, despite overhang of
problems on account of oil prices and large domestic liquidity, price situation
unlikely to cause concern to macro stability during 2004-05. Ø Need to overcome the bottlenecks in flow
of bank credit to agriculture and small and medium enterprises emphasised. Ø The outlook for the external sector
accords comfort to the conduct of public policies. |