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Chairman & Managing Director,
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| Bank of Baroda
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| The RBI has signalled a strong positive outlook for the Indian economy. This is an occasion used by the central monetary authority to give its overall economic assessment to banks, investors and rating agencies.
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| The GDP growth is placed higher, the outlook for inflation is more benign, expansion in money supply is within the trajectory, capital inflows are stronger and financial markets, especially forex markets, are stable despite the strong growth momentum. Keeping in view the comfortable liquidity position, the RBI has decided not to cut the CRR.
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| It has also not reduced the benchmark interest rates, primarily with a view to prevent overheating of financial markets.
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| As asserted by the Governor, during the upturn of the business cycle there could be overshooting of the markets.
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| Furthermore, with forex inflows mounting, the RBI has been pro-active in restricting any arbitrage opportunity. In line with declining interest rates, interest on deposits of foreign banks with Sidbi has been linked to the benchmark Bank Rate.
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| Though the governor has not taken any measures to influence directly the price or availability of credit, a series of measures have been announced to strengthen the credit delivery system.
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| To reduce the sectoral imbalances in growth, many measures are introduced to improve credit delivery to agriculture and small-scale sectors.
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| To systematically reduce the current gaps in financing, the governor has proposed an advisory committee/working group to undertake a comprehensive review and suggest ways to improve credit flows to SSIs and agriculture and better deployment of rural infrastructure development fund and priority sector resources with Sidbi.
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| The RBI has taken forward the process of financial sector reforms by proposing moves towards pure inter-bank money market/ abolition of sector specific refinancing facilities/ development of repo market etc.
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| To bring FIs on a par with the banks in prudential standards, FIs have been told to adopt 90 days norm for recognition of loan impairment. |
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