Highlights of RBI's monetary policy

The following are the highlights of the RBI's second quarter review of monetary policy, unveiled by Governor D Subbarao on Tuesday:

Rates:

• Raises statutory liquidity ratio by 100 bps to 25%
  
• Keeps other key rates unchanged
• Repo rate retained at 4.75%; reverse repo at 3.25%
• Cash Reserve Ratio kept at 5%
• Bank Rates same at 6%
• Provisioning requirement for realty up at 1% from 0.40%

Growth:

• Retains GDP growth projection for FY'10 at 6%
• Weak monsoon can impact overall economic prospects
• Poor farm output may affect industrial and services sectors
• Industrial production may revive further in coming months
• Growth in trade-related services such as cargo decelerating
• Domestic services — communication, construction turning up
• Direct impact of fiscal stimulus waning
• Indirect impact will persist for some more time
• External demand remains weak, hitting exports.

Inflation:

• Ups inflation projection to 6.5% pc by March-end, from 5%
• Aims to contain inflation at 4-4.5%
• Prices of food items risen due to short supply
• Large increase seen in prices of vegetables, sugar, etc
• Asset prices like stocks, realty, commodity have risen sharply

Others:

• Managing large govt borrowings a major challenge for RBI
• Non-food bank credit declines sharply
• Non-bank credit to commercial sector turning around
• Credit flow to agri, real estate, NBFCs remain high.
• Credit flow to housing low
• To announce third quarterly review in January.