RBI cuts repo rate by 0.25%, holds CRR: highlights

The Reserve Bank of India (RBI) cut its benchmark interest rate by 0.25 per cent on Friday for the third time since January, as expected, as growth slows and inflation ebbs, but said there is little room to ease monetary policy further, disappointing markets.

Following are highlights from the monetary policy statement:

POLICY MEASURES

 Cuts repo rate by 0.25 per cent to 7.25 per cent

 Reverse repo rate falls to 6.25 per cent

Cash reserve ratio unchanged at 4.00 per cent

Marginal Standing Facility rate adjusted to 8.25 per cent

Bank rate adjusted to 8.25 per cent with immediate effect

POLICY STANCE

RBI says there is little space for monetary easing

Says to actively manage liquidity to reinforce monetary transmission

Says biggest risk to economy is current account deficit

Says monetary policy cannot afford to lower guard against possibility of resurgence of inflationary pressures

Says risks from current account deficit could warrant swift reversal of policy stance

Says will use "all instruments" at command to condition inflation at 5 per cent by March 2014

FORECASTS

Baseline GDP growth forecast for 2013/14 at 5.7 per cent

Wholesale price index inflation projection during 2013/14 at around 5.5 per cent

M3 growth projection for 2013/14 at 13 per cent

Credit growth projection at 15 per cent, deposit growth at 14 per cent

PRUDENTIAL MEASURES

Says banks must cut hold-to-maturity bond portfolio by 0.50 per cent quarter starting June quarter

Proposes to restrict gold import on consignment basis by banks only to meet genuine need of jewellery exporters. Guidelines to be issued by May 31

Proposes to restrict bank loans against security of gold coins of up to 50 gram weight. Guidelines to be issued by end-May

Proposes to raise capital risk weight, provisioning requirement on loans to corporates in case of unhedged forex exposures. Guidelines will be issues by end-June

Proposes to allow foreign institutional investors to hedge currency risk with domestic exchange traded futures. Draft guidelines will be issued by end-July

Proposes to increase loan limit for micro and small enterprises in the services sector. Guidelines to be issues separately.

Copyright: Thomson Reuters 2013

The Reserve Bank of India (RBI) cut its benchmark interest rate by 0.25 per cent on Friday for the third time since January, as expected, as growth slows and inflation ebbs, but said there is little room to ease monetary policy further, disappointing markets.

Following are highlights from the monetary policy statement:

POLICY MEASURES

 Cuts repo rate by 0.25 per cent to 7.25 per cent

 Reverse repo rate falls to 6.25 per cent

Cash reserve ratio unchanged at 4.00 per cent

Marginal Standing Facility rate adjusted to 8.25 per cent

Bank rate adjusted to 8.25 per cent with immediate effect

POLICY STANCE

RBI says there is little space for monetary easing

Says to actively manage liquidity to reinforce monetary transmission

Says biggest risk to economy is current account deficit

Says monetary policy cannot afford to lower guard against possibility of resurgence of inflationary pressures

Says risks from current account deficit could warrant swift reversal of policy stance

Says will use "all instruments" at command to condition inflation at 5 per cent by March 2014

FORECASTS

Baseline GDP growth forecast for 2013/14 at 5.7 per cent

Wholesale price index inflation projection during 2013/14 at around 5.5 per cent

M3 growth projection for 2013/14 at 13 per cent

Credit growth projection at 15 per cent, deposit growth at 14 per cent

PRUDENTIAL MEASURES

Says banks must cut hold-to-maturity bond portfolio by 0.50 per cent quarter starting June quarter

Proposes to restrict gold import on consignment basis by banks only to meet genuine need of jewellery exporters. Guidelines to be issued by May 31

Proposes to restrict bank loans against security of gold coins of up to 50 gram weight. Guidelines to be issued by end-May

Proposes to raise capital risk weight, provisioning requirement on loans to corporates in case of unhedged forex exposures. Guidelines will be issues by end-June

Proposes to allow foreign institutional investors to hedge currency risk with domestic exchange traded futures. Draft guidelines will be issued by end-July

Proposes to increase loan limit for micro and small enterprises in the services sector. Guidelines to be issues separately.

Copyright: Thomson Reuters 2013