Thursday, April 28 2005 12:11 Hrs (IST) - World Time -

Mumbai: The Reserve Bank of India (RBI) today (Apr 28, 2005) kept the bank rate unchanged at six per cent.

The central bank also maintained the Cash Reserve Ratio (CRR) steady at five per cent in its annual policy unveiled in Mumbai.

The economic growth for 2005-06 was pegged at seven per cent.

The inflation rate for the current fiscal is estimated to be in the band of 5-5.5 per cent, RBI Governor Y V Reddy said while addressing the bankers today.

The agricultural growth is likely to be three per cent and the industry and service sector are expected to continue the current growth momentum while absorbing the impact of all oil prices.

The monetary policy would aim to provide liquidity for credit growth and support investments along with emphasis on price stability, the Governor said.

Reddy said the focus would be on financial stability and stabilising inflationary expectations.

On the repo rate, he said the fixed reverse repo rate would be raised by 0.25 per cent to five per cent.

The RBI from this financial year would also conduct quarterly review in July and January.

The mid-term review is to be carried on October 25, he added.

The Governor said it was desirable to keep the CRR rate unchanged following the review of the current liquidity situation though it would continue to pursue the mid-term objective of reducing the CRR to minimum statutory level of three per cent.

On credit flow to medium enterprises, he said there was an urgent need to upgrade technology of small-scale industries (SSI) to their graduation the medium enterprise sector. The Central Bank would explore modalities to meet their growing financial needs.

A simplified debt restructuring and rehabilitation mechanism is also being considered for the sector he said, adding the Credit Information Bureau of India Ltd is working out a solution that would provide credit reports on SSIs.

The RBI is reviewing all its existing guidelines on financing small-scale sector, debt restructuring, nursing of sick units with a view to rationalising, consolidating and liberalising them, he added.

RBI has maintained a status quo on the administered interest rates on savings deposit account, NRI deposits, small loans upto Rs two lakh and export credit.

Banks are being asked to refocus on deposit mobilisation and empower the depositors by providing wider access and better quality of banking services. On merger and amalgamation of banks, RBI has proposed to issue guidelines on merger and amalgamation between private sector banks and non-banking financial companies (NBFCs).

The guidelines would cover process of merger proposal, determination of swap ratio, disclosures, norms for buying/selling of shares by promoter before and during the process of merger and the board's involvement in the merger process.

The principles underlying these guidelines would also be applicable as appropriate to public sector banks, subject to relevant legislation.

Outlining the framework for development of Money market, RBI said with effect from June 11 non-bank participants, except primary dealers, would be allowed to lend on an average in a reporting fortnight, upto 10 per cent of their average daily lending in call/notice money market during 2000-01.

With effect from August 6, non-bank participants, except primary dealers (PDs), would be completely phased out of the call/notice market, it said.

The benchmark for fixing prudential limits on exposures to call/notice money market in case of scheduled commercial banks would be linked to their capital funds from Saturday (Apr 30, 2005).

RBI has stipulated all NDS members to report their money deals on Negotiated Dealing Settlement (NDS) platform from Saturday.