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A Monthly Newsletter of Indian Institute of Banking & Finance

(Rs. 40/- per annum)

Committed to professional excellence

Volume No. : 6

Issue No. : 1

August 2013

1st Quarter Monetary Policy Review - 30th July 2013
Monetary Measures q rate under Liquidity Adjustment Facility (LAF) Repo remains unchanged at 7.25%. q The reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, stands at 6.25 %. q The MSF rate remains unchanged at 300 basis points above the repo rate at 10.25 per cent. q The Cash Reserve Ratio (CRR) of scheduled banks has been retained at 4.0 per cent of their Net Demand and Time Liabilities (NDTL). Domestic Economy q supply (M3), at 12.8 per cent y-o-y on July 12, Money was close to the indicative trajectory of 13.0 per cent. On the other hand, non-food credit growth at 14.3 per cent was lower than the indicative projection of 15.0 per cent, with the slowdown spread across all major sectors. q Liquidity conditions have eased considerably since the May Policy. The average daily net liquidity injection under the Liquidity Adjustment Facility (LAF) declined to `828 billion during Q1 from `1,078 billion during Q4 of 2012-13. Government balances have been in deficit since June 28 and have bolstered liquidity, thereby significantly reducing the demand for funds under the LAF. The net drawal from the LAF declined significantly during the first week of July. On July 26, it stood at `558 billion [including `229 billion from the Marginal Standing Facility (MSF)]. q Following the reduction in the repo rate in May and easing of liquidity conditions, the modal term deposit rate of Scheduled Commercial Banks (SCBs) declined by 5 basis points (bps) during Q1. Although the modal base rate remained unchanged during the quarter, the Weighted Average Lending Rate (WALR) on the outstanding rupee loans of SCBs declined by 6 bps during Q1. The WALR for fresh loans,...


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