April 20, 1999
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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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