Second Quarter Review of Monetary Policy-Measures & Impact

(2010-11)

Sl. No. Monetary Measures Impact

These actions are expected to:
1 Bank Rate
The Bank Rate has been retained i. Sustain the anti-inflationary
at 6.0 per cent. thrust of
recent monetary actions and
Repo Rate outcomes
It has been decided to increase the in the face of persistent inflation
repo rate under the liquidity risks
adjustment facility (LAF) by 25 .
basis points from 6.0 per cent to ii. Rein in rising inflationary
6.25 per cent with immediate expectations, which may be
effect. aggravated by the structural nature
of food price increases.
Reverse Repo Rate
It has been decided to increase the iii. Be moderate enough not to
reverse repo rate under the LAF disrupt
by 25 basis points from 5.0 per growth.
cent to 5.25 per cent with
immediate effect.

Cash Reserve Ratio

The cash reserve ratio (CRR) of
scheduled banks has been retained
at 6.0per cent of their net demand
and time liabilities (NDTL).

2 RTGS Transactions: It has been The Indian RTGS has displayed

decided to increase the threshold
limit for RTGS transactions from
the present limit of ` 1 lakh to ` 2
lakh.
tremendous growth in both
transactions volume and the values
that it has been processing since
its inception in March 2004. With
the increased number of electronic
payment transactions, it has
become expedient to position the
Indian RTGS system primarily for
processing and settling large value

1

3 Risk Weights on Residential
Housing Loans
It is proposed to increase the risk
weight for residential housing
loans of Rs. 75 lakh and above,
irrespective of the LTV ratio, to
125 per cent.
4 Repo in Corporate Bonds
To permit settlement of repo in
corporate bonds on a T+0 basis in
addition to the existing T+1 and
T+2 basis..
5 To allow RRBs to open branches
in Tier 3 to Tier 6 centres as
centified in the Census 2001 (with
population up to 49,999) without
prior authorization of the Reserve
Bank, subject to their fulfilling
certain conditions
6 Corporate Governance:
To take appropriate steps to fully
align the corporate governance
practices in banks in India with the
principles enunciated by the
BCBS
payment orders
At present, the risk weights on
residential housing loans with
LTV ratio up to 75 per cent are 50
per cent for loans up to Rs 30 lakh
and 75 per cent for loans
above that amount. In case the
LTV ratio is more than 75 per
cent, the risk weight of all housing
loans, irrespective of the amount
of loan, is 100 per cent.
Housing loans with limit of Rs.75
lacs and above will become
costlier.
This will develop the corporate
bond market. This will further
facilitate repo transactions in
corporate bonds
As part of further liberalisation of
the extant branch licensing policy
in respect of regional rural banks
(RRBs).
Will improve the standard of
Corporate Governance