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

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

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