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Tuesday, October 30, 2007

$$ DreamGains !! $$ Highlights/ Key takeaways from RBI's credit Policy announcement

Highlights/ Key takeaways from RBI's credit Policy announcement:                                                          Source: Business Standard

 

  • CRR Hiked To 7.5% By 50 Bps

 

  • Repo, Reverse Repo, Bank Rate Rates Left Unchanged

 

  • RBI Ready To Take Steps Given Global Uncertainties & Unconventional Policy Responses To Developments

 

  • GDP Growth Target Unchanged At 8.5%

 

  • Inflation Target Maintained At 5%

 

  • Reiterates Resolve To Lower Inflation To 4-4.5%, Going Forward

 

  • Medium Target for inflation rate is 3%

 

  • Money Supply Target Retained at 17-17.5%

 

  • Credit growth has slipped to projected level of 24-25%;

 

  • Need to moderate expansionary effects of capital flows so that money supply doesn't exceed target

 

  • RBI Retains Option To conduct overnight or Longer term Repos

 

  • Biggest Challenge For RBI is excess money supply due of Capital Flows

 

  • Inflation Expectations Well-Anchored

 

  • Risk To Inflation From Liquidity Infusion By global Central Banks

 

  • Risks Inflation Also From Crude and Chinese Demand

 

  • Risks to Inflation to Dominate Policy in the Next 12-18 months

 

  • Inflation risks From Oil Prices remain Incipient

 

  • Asset Prices High, But Some Evidence Of Stable Real Estate Prices

 

  • Recent Events in Financial Markets show concern for fincl stability can assume overriding Importance

 

  • Agriculture Growing Above Trend, Industry & Services Shows slight slackening

 

  • Another Oil Price hike seems Reasonable

 

  • Fiscal Consolidation Under Strain on High Interest Payments & Subsidies

 

  • Revenue Deficit For Apr-Aug at 123% of estimates vs 94% year ago

 

  • H1 Current A/C Deficit Expected to Have Been Contained At Year Ago Level

 

  • Non competitive bidding for state loans to be permitted by March 2008

 

  • State govts may prepay Power bonds from April 2008 onwards

 

  • New system of valuing and issuing floating rate bonds by Mach 2008

 

  • Committed to Allowing Repos in Corp Bonds, when safe settlement, DvP is in place

 

  • Permits short sale & When Issued Deals Outside of NDS-OM System

 

  • Non Deposit Taking NBFCs can access NDS-OM through CSGL Route

 

  • Oil Cos Can Hedge 50% of their Inventory using OTC Derivative products

 

  • Importers, exporters may write covered call and put options

 

  • Importers, Exporters may write in rupee & cross currency and receive premia

 

  • Banks permitted to Run Cross Currency Options Books; Subject to RBI Nod

 

  • Banks permitted to offer American options

 

  • Final Guidelines for Banking Holding Cos to be Issued By End –Nov

 

  • Final Guidelines on Credit Default Swaps To Be Issued By End Nov

 

  • May Bank Errant Banks from engaging recovery Agents; Ban Likely On Banks against which Court's Have Issued Penalties

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Regards

BigGains !!
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