RBI to review Credit Policy on Oct 29

MUMBAI: Reserve Bank of India (RBI) will carry out a mid-term review of the monetary and credit policy for 2002-03 on Tuesday with a likely reassessment of the projected growth rate of 6-6.5 per cent.
The RBI governor Bimal Jalan would hold a meeting with the chief executives of major scheduled commercial banks for the review.
The apex bank, in its annual report in August, also stated that it would reassess in the mid-term review the projected growth of 6-6.5 per cent, which was based on assumption of a normal monsoon.
The report had made it clear that a reassessment of the GDP growth would be attempted in October by which time reliable information regarding effects of drought on agricultural and industrial output would be available.
Opinion on a bank rate cut was divided. One view was that a reduction would help boost demand in view of drought and sluggishness in the economy, the other felt RBI may wait for more evidence on this front before resorting to this move.
Analysts felt that a bank rate cut was unlikely now as funds were available at sub-prime lending rate, which in some cases was below 10 per cent.
Analysts said banks were flush with funds and the credit offtake was not as expected as compared to last year mainly due to the slowdown in the industrial sector.
RBI, in its annual monetary and credit policy in April, had stated that a 50 basis point reduction may depend on the monetary development. It had, however, not fixed any timing for lowering the bank rate.
Government securities players are expecting a cut in the repo rate (repurchase), which is presently at 5.75 per cent, as there was plenty of liquidity in the market going by the trends witnessed during the recent auctions conducted by the apex bank.
This move, they feel, could also help reduce the rate for short term loans. RBI had brought down the repo rate by 25 basis points in June 2002.