Sanjay Sachdev
CEO, IDBI Principal MF
The Credit Policy 2002-03 is progressive and seeks to address the various needs of our economic system.
There is a positive note in the announcement of a reduction in the three key rates. This gives an indication that the softer interest rate regime will continue at least until next year budget.
The markets were expecting a bank rate and repo rate cut, but a cut in the CRR comes as a positive step and will further keep on improving the liquidity in the market.
The RBI has lowered the key interest rates (Bank Rate, Repo Rate) by 25bps each, which should undoubtedly provide a further impetus to economic growth seen in the first half of this fiscal.
The release of liquidity through a 25 basis points reduction in CRR is also a welcome step in maintaining soft rate conditions.
The rate cuts would also put pressure on the banking system to reduce both PLRs and spreads, while setting the stage for the government to make changes in its rigid administered rate savings schemes. In laying the path for a move to a pure inter-bank call market; RBI has made repos more attractive by allowing rollover of repo securities.
However, one noteworthy aspect which the Reserve Bank of India & Governor Jalan seems to have passed on this time around is the allowance of trading in Government Securities on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
Had he championed this - it would definitely have brought about much needed transparency and would have helped broadbase the markets.
Simultaneously, the recognition of the CBLO (introduced by CCIL) as a money market instrument could throw up an attractive liquidity management tool for non-bank participants. On the whole, we expect a benign interestrate environment to prevail over the next 6 months.
