Following are the highlights of third quarterly review of Monetary Policy released by the Reserve Bank of India on Wednesday:
Overnight lending rate (repo) up by 0.25 pc to 7.5 pc
Consequently, liquidity to tighten to tame inflation
Other rates kept unchanged
GDP forecast raised to 8.5-9 pc for 2006-07 from 8 pc
Inflation to be brought down close to 5-5.5 pc
To pursue goal of ceiling on inflation at 5 pc
Currently, inflation at 5.95 pc
Banks have to keep two paise for every Rupee given to real estate sector, capital market, personal loans (excluding housing), against credit cards and to NBFCs
Consequently, rates for these loans expected to rise
Concerns over international crude prices
Liquidity management to receive priority in the remaining part of year
Impact of monetary policy expected to be stronger than before as a result of tightening of liquidity
RBI to use all policy instruments, including CRR, to ensure appropriate changes in liquidity for evolving situation
RBI to ensure that legitimate requirements of liquidity are met
High growth, firming up of inflation, coupled with escalating asset prices, tightening infrastructural bottlenecks complicated monetary policy conduct
Concerns relating to persistently high credit growth and possible decline in credit quality
Risk weight increased to 125 per cent for banks' exposure to NBFCs
Banks restrained from granting fresh loans over Rs 20 lakh against rupee and foreign currency deposits of non-residents
Interest rate ceiling on non-residents deposits reduced