Prudential ICICI, AMC The annual policy statement of the Reserve Bank of India (RBI) is forward looking, balancing adequate liquidity for growth with equal emphasis on price stability.
The reverse repo rate has been hiked by quarter percent (0.25 per cent) to per cent level for controlling inflationary pressure. The bond market reacted negatively on this proactive but unexpected step.
The RBI has initiated various steps like intra-day short selling of gilts, electronic trading platform for repo transactions and call money markets, reduction in minimum maturity for certificate of deposits to 7 days, consolidation of debt for increasing liquidity in gilt markets, T+1 settlements for government securities and introduction of when issue market.
These steps, when implemented, will deepen the bond market and will help in increasing interest of the market participants in government securities market.
The foreign exchange market has been liberalised by allowing cancellation and rebooking of forward contracts and extension of trading hours.
The liberalisation of overseas investment by Indian entities upto 200 per cent of net worth is positive.
The Reserve Bank of India has emphasised on credit delivery to small and medium enterprise which is a step in the right direction for sustaining rapid economic growth.
The RBI has focused on customer service in this policy and that is a very welcome step. With the onset of technology, the customer-banker relationship is becoming costly as well as impersonal.
The RBI has also taken a welcome step of holding four quarterly reviews for the monetary policy.
This will help financial markets to stabilise and get in synch with RBI's views on economy and monetary policy.
In summary, this policy is continuation of the RBI's role of developing and deepening India's financial market and integrating it with the global markets.
