The Reserve Bank of India (RBI) in its third quarter review of the Monetary Policy 2008-09, kept the key interest rates unchanged. The central bank also scaled down the GDP growth target to 7% with a downward bias from the earlier 7.5%-8%.
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The repo rate under the LAF has been kept unchanged at 5.5%. The reverse repo rate under the LAF has been kept unchanged at 4%. The Bank Rate has been kept unchanged at 6%.
The review also reduced the inflation target to 3% in the medium term. The inflation projection is down keeping in view the global trend in commodity prices and the domestic demand-supply balance.
Money supply growth has been revised to 19% from 17% earlier. RBI expects fiscal deficit for FY09 at 5.9 per cent of GDP against earlier estimate of 2.5 per cent.
The Reserve Bank has allowed banks to avail liquidity support under the LAF for the purpose of meeting the funding requirements of mutual funds (MFs), non-banking financial companies (NBFCs) and housing finance companies (HFCs) through relaxation in the maintenance of SLR up to 1.5 per cent of their NDTL.
A special refinance facility for scheduled commercial banks (excluding RRBs) was provided by the Reserve Bank on November 1, 2008 under Section 17 (3B) of the RBI Act, 1934 up to 1% of each bank’s NDTL as on October 24, 2008. Both these facilities are currently available up to June 30, 2009.
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