<b>Credit Policy</b>: Emphasis on price stability

The stance of monetary policy in 2007-08 would be conditioned by the global and, more particularly, domestic developments, according to the credit policy announcement by the Reserve Bank of India (RBI) today.

"Monetary policy, while contributing to growth, is strongly in favour of reinforcing the emphasis on price stability and anchoring inflation expectations for the period ahead.

"The Reserve Bank will ensure that appropriate liquidity is maintained in the system so that all legitimate requirements of credit are met, particularly for productive purposes, consistent with the objective of price and financial stability.

"Towards this end, the Reserve Bank will continue with its policy of active demand management of liquidity through open market operations (OMO) including the MSS, LAF and CRR, and using all the policy instruments at its disposal flexibly, as and when the situation warrants.

"Barring the emergence of any adverse and unexpected developments in various sectors of the economy and keeping in view the current assessment of the economy including the outlook for inflation, the overall stance of monetary policy in the period ahead will continue to be :

* to reinforce the emphasis on price stability and well-anchored inflation
expectations while ensuring a monetary and interest rate environment that
supports export and investment demand in the economy so as to enable
continuation of the growth momentum.

* to re-emphasise credit quality and orderly conditions in financial markets for securing macroeconomic and, in particular, financial stability while
simultaneously pursuing greater credit penetration and financial inclusion.

* to respond swiftly with all possible measures as appropriate to the evolving global and domestic situation impinging on inflation expectations and the growth momentum."