Commodity Online
MUMBAI: In these times of market turmoil, the Reserve Bank of India (RBI) on Friday surprised the financial markets by keeping key rates unchanged in the mid-term review of annual monetary policy.

Outlining the monetary measures, the policy said the benchmark bank rate has been kept unchanged at 6 per cent, repo rate at 8 per cent, reverse repo at 6 per cent and CRR at 6.5 per cent.

However, the apex central lowered India's economic growth projections to 7.5-8 per cent for 2008-09.

With the global commodity and oil prices cooling, RBI kept the inflation projection unchanged at 7 per cent by end-March but emphasised that inflation continued to be a matter of concern requiring constant "vigil."

On October 11, the apex bank cut CRR, the percentage of amount banks are required to park with the central bank, by 2.5 per cent -- from 9 per cent to 6.5 per cent -- to inject Rs 100,000 crore (Rs 1000 billion) liquidity into the system. It reduced repo rate, the rate at which RBI lends short-term funds to banks, by one per cent to 8 per cent on October 20.

Several banks have already indicated after the CRR and repo rate cut that they would take call on reducing their interest rates after the credit policy.

In the face of the global financial turmoil, Reserve Bank, in its mid-term review, said that the developmental and regulatory polices of the central bank would continue to adopt a holistic approach to the responsibility of price and financial stability.

"The RBI is committed to deepening and expanding reforms in the financial sector so that efficient and competitive financial intermediation evolves to secure sustained growth with stability," the RBI said.

The policy has set its focus on issues such as development of various segments of financial markets and strengthening the financial market infrastructure, further liberalisation of forex transactions and relaxation of interest rate ceilings of NRI deposits.

Besides, it focuses on strengthening the regulatory framework of cross-border supervision and surveillance of banks' credit portfolios, the apex bank said.

Terming the global financial situation as the worst since the Great Depression, the RBI said it has been proactive and has taken measures to manage the rapid developments and ease pressures stemming from it.

"The RBI is confident of managing the situation and minimising the adverse impact of the global crisis on the Indian economy," it said.

"Our financial system is strong and healthy and our economic fundamentals are strong. Once the global situation is managed, and calm and confidence are restored, we will return to our higher growth trajectory," the review said.