RBI keeps key interest rates unchanged & hikes SLR to 25%

As expected from the growth prospective, RBI kept key interest ratios(CRR, Repo & Reverse Repo) unchanged and increased SLR from24% to 25%. In my last post, I wrote in bottom line that

"So instead jumping to reversing the monetary policies, RBI should give some more time to country to get back into fast track growth rate & then can think of increasing SLR, CRR, Repo & Reverse Repo in a sequential manner".

So by keeping important ratios unchanged & increasing SLR, RBI has given some more time for monetary expansion & at the same time has give the hint that next move will be of CRR to curb inflation.

This is how RBI has reduced key ratio is sequential manner...


As I raised the point of credit growth slow below picture indicates that...

And I raised one more point export & import in my previous posting...

And finally inflation, about which RBI is worrying...


And other highlights of today's policy review from RBI are...

1. RBI increased its March-end wholesale price index (WPI) inflation estimate to 6.5% with an upward bias, revised from its earlier target of 5%.

2. The estimate for FY10 gross domestic product (GDP) growth was left unchanged at 6.0% with an upward bias.

3. The Central bank cut its FY10 credit growth target to 18% from 20% that it had set in the July monetary policy review.

4. The RBI also asked banks to ensure that their total provisioning coverage ratio is not less than 70% and imposed a timeframe of September 2010 to achieve this target. The coverage ratio is a measure of the bank’s ability to absorb potential losses for non-performing assets (NPAs) and is arrived at by calculating the loan loss reserve balance with the total non-performing loans.

5. RBI increased the provisioning requirement for advances to the commercial real estate sector classified as ‘standard assets’ from the present level of 0.40% to 1%, a move that makes lending to the sector tougher.