RBI Policy Note - Jan 2012 :: CSEC Research

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Policy Note - Jan 2012

Dear All, 

 

Highlights

·         Status quo on policy rates

·         Repo – 8.5%, reverse repo – 7.5% and margin standing facility rate – 9.5%

·         Cash reserve ratio cut by 50 basis points to 5.5%

·         Statutory liquidity ratio maintained at 24%

·         GDP growth cut from 7.6% to 7%

·         March 2012 inflation projection retained at 7%

·         Non-food credit growth cut to 16% 

House view:

The cut in CRR is expected to release ~Rs 320 bn into the system, however, liquidity conditions are expected to remain tight. Global commodity prices, recent upswings in crude oil prices (driven geo-political factors), weak rupee and suppressed fuel prices are potential sources of risk to inflation. Credit growth is expected to remain subdued and lag deposit growth. Over the next couple of months, deposits rates are likely to stay put. Going forward the RBI is likely to adopt a pro-growth policy stance contingent on inflation, hovering within the RBI comfort zone.

  

Regards,

CSEC Research