RBI Policy

Policy rate changes:

1)      Repo Rate has been hiked by 50bps to 7.25%. As a result the reverse repo rate under the new mechanism automatically adjusts to 100bps lower from the repo rate at 6.25%

2)      Bank rate and CRR kept unchanged at 6%

Monetary Projections:

1)      FY12 baseline GDP growth expected to be around 8%, but range decided at 7.4-8.5%.  

2)      Baseline WPI inflation target for March 2012 is at 6%. However, expectation is of inflation remaining elevated in H1FY12 (`9% factoring in fuel price hikes) before it starts to gradually cool down in second half.

3)      FY12 Money Supply growth estimated at 16.0%

4)      Credit growth at 19.0%

5)      Deposit growth at 17.0%

Regulatory Measures:

1)      Savings Bank Deposit Rate hiked by 50bps to 4.0% currently, till further clarity over the process of savings bank rate deregulation emerges – Impact 8bps negative for NIMs (4bps loss for every 25bps hike in SB rates)

2)      Enhancement of Rates of Provisioning for Non-Performing and Restructured Assets - Impact 8bps negative for NIMs (4bps loss for every 25bps hike in SB rates)

a.       Advances classified as “sub-standard” will attract a provision of 15% v/s 10% currently (the “unsecured exposures” classified as sub-standard assets will attract an additional provision of 10%, i.e., a total of 25% as against the existing 20%)

b.      the secured portion of advances which have remained in “doubtful” category up to one year will attract a provision of 25% v/s 20% currently

c.       the secured portion of advances which have remained in “doubtful” category for more than one year but upto 3 years will attract a provision of 40% v/s 30% currently

d.      restructured accounts classified as standard advances will attract a provision of 2% in the first 2 years from the date of restructuring, or in cases of moratorium on payment of interest/principal after restructuring, for the period covering moratorium and 2 years thereafter (as against existing provision of 0.25-1.00%, depending upon the category of advances); and

e.      restructured accounts classified as non-performing advances, when upgraded to standard category will attract a provision of 2% in the first year from the date of upgradation (as against existing provision of 0.25-1.00%, depending upon the category of advances).