Monetary policy review and expectations 2007-08

RBI’s monetary policy review was in line with expectation, with status quo being maintained on the major policy rates. We take comfort from RBI’s diluted stance on credit growth moderation to 24-25% from its earlier 20%. In line money supply and deposit growth have been estimated higher than previous year to facilitate growth. Slower moderation in credit growth should avoid any sharp monetary tightening in the near future. Lowering of risk weights from 75% to 50% on home loans up to Rs2mn (temporary for one year), is a positive measure as it will re duce pressure on capital adequacy and in turn upward pressure on lending rates. We expect RBI to maintain a close vigil on the impact of its previous policy actions, which should see tight monetary condition persist. The Central Bank also announced a host of measures taking gradual steps towards capital account convertibility.
Click below for the detailed Monetary policy review :
Warm Regards,
Ashutosh NarkarIndia Infoline Ltd.


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