Monetary Policy, Subba Rao, RBI, Highlights

2.  Dr. D. Subbarao in statement on the Monetary
Policy for 2012-12, indicates the tough stand
RBI has taken on number of fronts in
last three years or so. Although, after a gap
of three years, Reserve Bank Governor D
Subbarao slashed short term lending rate by
0.50 per cent to 8 per cent, by reducing
the repo rate, yet it signaled that there will be
no further cuts if inflation continued its ugly
head. Some of the major highlights of
the Monetary Policy statement are as follows:-

3.  Repo Rate cut by 50 bps to 8.00 percent;
 Reverse repo rate adjusted 7.00 percent
 Bank Rate and MSF adjusted to 9.00 percent
(The borrowing limit of banks under marginal
standing facility has been increased to 2
percent from 1 percent)
 Cash reserve ratio unchanged at 4.75% .
Similarly SLR remains unchanged at 24%

4.  Says modest growth slowdown, upside risks to
inflation limit space for further reduction in
policy rates
 Policy stance aims to provide greater liquidity
cushion to financial system
 Liquidity moving towards comfort
zone, proactive steps will be taken to restore to
comfort zone if needed.

5.  RBI has pegged the GDP growth rate for 2012-13 at
7.3 per cent. It is expected to be 6.9 per cent in
2011-12.
 Dr. Subbarao, ruled out further reduction in policy
rate in the immediate future citing persistent
upside risks to inflation and possible fiscal
slippages driven by higher oil subsidies. It expects
the inflation to be around 6.5 per cent by March
2013.
 Money supply growth projected at 15
percent, credit growth at 17 percent and deposits
at 16 percent in 2012-13

6.  Says current account deficit level unsustainable
 Financing of current account deficit will
continue to pose a major challenge
 Risk of pass-through of administered prices
into inflation limited on reduced corporate
pricing power
 Non-food manufactured products inflation
expected to remain contained