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Adesh Gupta
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President & CFO
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| AV Birla group |
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| The Mid-Term Credit Policy may not have fulfilled the expectations of rates cuts, but it has not affected the share market party with the Sensex continuing above 5000 even after policy announcements. |
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| It appears that market strongly believes that actual measures will be taken at more appropriate times, as agreed by the RBI governor later in his press briefings. |
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| Overall, one gets a feeling that economy is going in the right direction. The RBI and all regulators are endorsing the same with positive measures. |
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| The stance of the monetary policy continues to be provision of adequate liquidity to meet credit growth and support investment demand with a vigil on the price level with preference for soft and flexible interest rate environment. |
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| While RBI seems to agree with IBA that the banks have the freedom to price their loan products based on time-varying term premia and relevant transaction costs, however, it is still stricting to his earlier instance of having single benchmark PLR. |
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| The matter is entirely left now to banks to float products by using market benchmarks in a transparent manner in guidance with IBA. |
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| The linking of interest payable on money advanced to SIDBI for priority sector advances, with Bank Rates, priority sector lending by SIDBI also should become softer. |
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| Hedging of Forex exposure for foreign currency loans above $10 million is a positive measure to stop speculation. The loans with natural hedging by way of exports are rightly exempted from such specific hedging. |
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| Single window approval for launching offshore mutual funds, sale of government securities already contacted for purchase but not physically held , common prudential norms for loan impairments, monitoring of systemically important Financial intermediaries (SIFIs) and commitment to implement real time gross settlement system(RTGS) by January, 2004,freedom to coporates in writing off the export receiviable, payment of tax refunds through ECS are some of the other welcome measures. |
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| It is heartening to note that despite a steep rise in the price of government secures the investement fluctuation reserves(IFR) are only 1.4% against an immediate target of 5%. |
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| The phasing out of non-banking participant from interbank call market is as per expected lines. In the progressive economy rationale of such move to over protect banking sector is not justified. |
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| In nutshell, being the first policy from a new governor , the expectations were high. |
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| The governor has not obliged market across by meeting such expectations , however, has created a lot of optimism in economic conditions. |
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