RBI policy in two minutes

The central bank reduced CRR by 25 bps

Here's a brief overview of RBI's half-yearly monetary policy that was announced today.

Monetary measures

* Cash Reserve Ratio (CRR) of banks cut by 25 basis points (bps) to 4.25% effective the fortnight beginning November 3.

* No change in repo rate.

* Bank rate stands unchanged at 9%.

Key objectives

* Cut in CRR is for keeping liquidity comfortable to support growth.

* Growth stimulus of the policy actions will be reinforced.

* Anchor medium-term inflation expectations.

Growth & Inflationary

* GDP growth for 2012-13 is revised downwards to 5.8% from 6.5% in July.

* WPI inflation for March 2013 is raised to 7.5% from 7% indicated in July.

Credit - deposit growth

* Non-food credit growth projection revised to 16% from 17% projected in April.

* Deposit growth projection has been kept unchanged at 15%.

* Money supply growth projection revised downwards to 14% from 15% projected in April.

Regulatory steps

* Settlement cycle of primary auction in Treasury Bills (T-Bills) reduced to T+1 from T+2 earlier.

* Move towards developing a trade repository for Over The Counter (OTC) derivatives.

* Definition of micro and small enterprises modified to facilitate early rehabilitation of potentially viable sick units.

* Panel set up to examine feasibility on long term fixed rate loan product

Measures for banks

* Provision for restructured standard accounts raised to 2.75% from 2% currently.

* Rationali2ing priority sector lending norms

* Banks to put in place mechanism for information sharing by end-December to address NPA problem

* Banks asked to have board approved for stipulating a limit on the unhedged position of corporates

* Urban Co-Operative Banks allowed to undertake repo transactions in corporate bonds