Reserve Bank of India has announced its mid quarterly monetary policy review on 18.06.2012. For the benefit of students, competitive exams aspirants and for those who are preparing for interviews and Group Discussions we have given brief explanation of this monetary policy review.
No Reduction in CRR & REPO Rate: RBI decided to keep the cash reserve ratio and the policy repo rate unchanged at 4.75 per cent and 8.0 per cent respectively.
No change in Reverse REPO: The reverse repo rate remains unchanged at 7.0 per cent. The marginal standing facility rate and the Bank Rate are to stand at 9.0 per cent.
Explanation by RBI: Further reduction in the policy rate at the time when the inflation is still above the comfort level of the people is likely to aggravate the inflationary pressures. The RBI while announcing its monetary policy opined that there are several other factors other than policy rates, which are affecting the growth and investment activities in the country.
The Reserve Bank decided to enhance the Export Credit Refinance (ECR) limit to 50% of the outstanding rupee export credit for banks, from 15%, a move that will inject Rs 30,000 crore into the system.
Explanation by RBI: With a view to enhancing the credit flow to the export sector, it has been decided to enhance the eligible limit of the ECR facility for scheduled banks (excluding RRBs) from 15% of the outstanding export credit eligible for refinance to 50%, effective fortnight beginningJune 30, 2012.
Threats: International credit rating agency Standard & Poor’s had warned thatIndiacould be the first BRIC nation to lose its investment-level credit rating due to its fragile outlook of economy and frozen policy reforms,