&lsquo;The guidance for the October monetary policy is clear. There is enough liquidity in the system to meet the demand from the government and private borrowers, good growth momentum, good flow of offshore liquidity through debt and capital markets, and rock-solid stability in money markets, despite the fiscal deficit. Markets have fared well since the July policy, with a decent rally in the stock market, appreciation of the rupee and stable bond yields.

Stance to spur growth

Business Standard

Developers said property prices were likely to go up after the Reserve Bank of India (RBI) increased the provisioning for commercial real estate. This, they said, would increase the cost of funds.

Provisioning norm to raise  commercial realty prices

The policy review is an emphatic assurance that the central bank is watching, calibrating and now definitely timing for a quantitative exit road map. The hike of 100 basis points in the statutory liquidity ratio, which was reduced to 24 per cent after the global financial crisis last year, is the harbinger of changing headwinds, making India the second G20 to economy to underline a move towards monetary tightening.

Inflation to drive future action

The RBI has carried out a balancing act with the latest credit policy, with the twin purposes of sustaining early stage economic recovery and controlling rising inflation. It also reaffirms an expected GDP growth rate of 6 per cent, with an upward bias.

A balancing act

Monetary measures: 
*&nbsp;The bank rate, repo rate, reverse repo rate and CRR unchanged at 6%, 4.75%, 3.25% and 5%, respectively
*&nbsp;SLR raised to 25% of NDTL 
* GDP growth target for FY10 unchanged at 6% with an upside bias; RBI warns agricultural output is likely to be lower than in the previous financial year
Key objectives: 
* RBI projection of inflation by the end of March 2010 revised to 6.5%, with an upside bias, from the earlier target of 5%
* Medium-term inflation target 3%
* Price stability
Stance for the review: 
* Keep a vigil on trends in inflation and be prepared to respond swiftly and effectively through policy adjustments to stabilise inflation expectations
* Monitor the liquidity situation and manage it actively to ensure credit demands of productive sectors are adequately met; also securing price stability and financial stability
* Maintain a monetary and interest rate regime consistent with price and financial stability, the one which is supportive of

MONETARY POLICY: In 2 minutes

The credit rating assigned to non-banking finance companies (NBFCs) involved in infrastructure will now be linked to the risk weight of a bank&rsquo;s exposure to the former.

New risk weight to ease liquidity for infra NBFCs

RBI Governor D Subbarao spoke to the media after presenting the monetary policy.

&#39;Inflation is a concern&#39;

Bank profits could take a knock over the next four quarters, with the Reserve Bank of India (RBI) today mandating a loan-loss coverage ratio of 70 per cent.

Bank profits likely to take a knock

The cut-off yield at government bond auctions may be higher by three or four basis points, as the Reserve Bank of India has not accepted the demand for an increase in the limit on securities kept in the Held to Maturity (HTM) category.

No change in held-to-maturity limit

By reinstating the SLR requirement to the pre-crisis levels of 25 per cent, even as the banking system is still sitting on surplus holdings of more than 27 per cent, the Reserve Bank if India governor has signalled that sooner or later the policy of monetary easing will have to be withdrawn. However, when that will be done will be a matter of judgement based on the needs of the economy.

BS Jury

Beginning the end of its accommodative monetary policy, the Reserve Bank of India (RBI) today restored the statutory liquidity ratio (SLR) to 25 per cent from 24 per cent and closed the special financing window set up for mutual funds and home finance companies.

RBI restores SLR to 25%

Taking a cue from other banking sector regulators, the Reserve Bank of India (RBI) is set to issue fresh guidelines on compensation policies of private and foreign banks.

Soon, new rules may limit bankers' pay

Ten-year bonds gained for a third day on speculation investors will increase holdings as government debt sales slow through the remainder of the year.

Bonds advance as govt debt supply eases

The Reserve Bank of India has clearly chosen not to upset the recovery and growth momentum for now by keeping key policy rates unchanged in the second quarter review of the monetary policy for 2009-10. This comes as good news for the corporate sector and industry in general, which has been making gradual strides to get back on the growth path after the most challenging year.

Calibrated approach

The monetary policy underlines the incipient signs of recovery of the global economy and improving prospects for the domestic economy. RBI has moved its stance from balancing between growth and inflation to now focussing more on inflation basis, their comfortable outlook on growth momentum. While a status quo has been maintained on rates, there are many references in the policy that suggest possible rate hike if inflation moves out of the comfort zone.

Incipient signs of recovery

I had a credit card from a nationalised bank with a limit of Rs 50,000. Last year, I made purchases of Rs 10,000. However, I forgot my card in the shop. Two hours later when I realised this, I called up the bank and blocked the card. I also confirmed it with the bank&rsquo;s call centre later. When I received the statement after a few days, I was shocked to see a bill of Rs 72,000.I filed a complaint, wrote letters to the bank and our correspondence continued for nine months.

Debt counselling

The yield on government securities may harden further due to huge supply of paper, including 10-year state government bonds through auction.

Bond yields may harden further

India&rsquo;s 10-year bonds gained the most in almost two weeks after the government sold debt at lower yields than traders&rsquo; forecast at an auction on September 4, suggesting increased demand for fixed-income securities.

Rising demand for debt boosts 10-yr bonds

SBI has lost market share to nimble-footed private banks.

Are you being served?

I had taken a housing loan three years back. When the interest rate went up, my bank was quick to increase the equated monthly instalment (EMI). But when the rates started falling, as was the case in the last ten months, the reduction in my EMI was not so rapid.

Why rates rise faster, fall slowly

Four indian banks are offering cards with a credit limit of 80-90% of the fixed deposit.

Surety for you, security for the bank

Financial Analysis: Find the Latest Financial News Analysis & Research Updates from all top sources for the Indian Finance industry on Business Standard.

Finance News Analysis, Financial Analysis and Research | Business Standard

Find the Latest Financial News Analysis & Research Updates from all top sources for the Indian Finance industry on Business Standard.

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