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Tuesday, July 28, 2009

RBI to maintain accommodative monetary stance

RBI indicated M3 money supply may grow 18% and bank credit to rise by 20% in 2009-10 in its policy review today.

The central bank announced its policy review today, 28 July 2009. Reserve Bank of India (RBI) said it will maintain accommodative monetary stance until robust signs of recovery is visible. RBI indicated M3 money supply may grow 18% and bank credit to rise by 20% in 2009-10. RBI said government will need to return to a path of fiscal consolidation. It said commercial banks have scope to cut lending and deposit rates further. RBI will actively manage liquidity to avoid government borrowing crowding out private credit demand.

This accommodative monetary stance is, however, not the steady state stance, RBI said. On the way forward, the Reserve Bank will have to reverse the expansionary measures to anchor inflation expectations and subdue inflationary pressures while preserving the growth momentum. The exit strategy will be modulated in accordance with the evolving macroeconomic developments, it said.

The central bank in its policy review today, 28 July 2009 projected gross domestic product (GDP) growth at 6% in 2009-10 with upward bias. Reserve Bank of India (RBI) expects wholesale price inflation of about 5% by end March 2010. The central bank also kept rates on hold at its policy review today, 28 July 2009.

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