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Credit Policy highlights: new mutual fund for government securities

Following are the highlights of the slack season Credit Policy for the first half of the 1999-2000 announced by the Reserve Bank of India here today.

• Cash Reserve Ratio reduced by half a percentage (50 basis points) to 10 per cent effective May 8, 1999.
• Bank rate, repo rate unchanged.
• Six-seven per cent gross domestic product growth seen in 1999-2000 as against 5.8 per cent a year ago.
• 15.5 - 16 per cent M3 growth seen in 1999-00
• M1 15.0-15.5 per cent growth desirable aim for 1999-00.
• Introduction of an Interim Liquidity Adjustment Facility through repos and lending against collateral of government of India securities.
• Withdrawl of general refinance facility and introduction of Collaterialised Lending Facility.
• Scheduled commercial banks are eligible for Export Credit Refinance Facility at the bank rate with effect from April 1.
• UTI, LIC, IDBI and other non-bank participants in the money market to access short term liquidity through repos.
• To promote the retail market segment, mutual funds dedicated to government of India securities will be set up
• Banks have been made free to offer interest rates on deposits of any maturity above 15 days.
• Banks are free to prescribe their own lending rates, including Prime Lending Rate, for different maturities.
• Appointment of a high-power committee to review the performance of the urban co-operative banks and suggest measures for strengthening this vital sector.
• Money market mutual funds are allowed to offer 'cheque writing' facility to their investors.
• Auction of 14-day and 91-day treasury bills will be held on weekly basis.
• Banks must classify minimum 75 per cent of gilts as current investment.
• Bank classification of bond investments from March 31, 2000.
• Withdrawal of general refinance facility
• Export Refinance Facility to continue at eight per cent.
• Interim liquidity adjustment facility via repo.
• Liquidity facility also against gilts as collateral.
• Asset-Liability Management rules for financial institutions.
• Investment in venture capital priority sector lending.
• No limit on maximum period for repos.
• Money market funds to offer cheque writing.
• Non-banks, UTI, LIC, IDBI in repo market.
• Repos in demat gilts, PSU, corporate bonds.
• Net-owned fund need for new non-bank firms raised.
• Permission for non-banks call loans up to end-December.
• States can take special Ways and Means Advance loans against treasury bill collateral.
• 182-day treasury bills to be issued every two weeks.
• New gilts to be issued on price basis.
• Banks allowed to fix prime loan rates for varied periods.
• Panel looking into norms to boost gilt retail market.
• Banks to also offer fixed-rate loans.

UNI

RBI Governor Bimal Jalan's policy statement

April 20, 1999: The RBI's Credit and Monetary Policy

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