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HIGHLIGHTS-India cbank leaves rates unchanged, cuts CRR
September 17, 2012 / 6:38 AM / 5 years ago

HIGHLIGHTS-India cbank leaves rates unchanged, cuts CRR

MUMBAI, Sept 17 (Reuters) - India's central bank left
interest rates unchanged on Monday b ut cut the cash reserve
ratio for banks, saying the primary focus of monetary policy
remains fighting inflation, days after the government unveiled
reforms to boost growth and improve its fiscal position. 
    The Reserve Bank of India left the policy repo rate
 at 8 percent, in line with expectations in a
Reuters poll on Friday before the government unexpectedly
announced measures to allow foreign direct investment in
industries, including supermarkets and airlines. 
    On Thursday, the government announced a sharp increase in
the price of diesel, which is heavily subsidised.

    Following are highlights from the monetary policy review: 
    * Keeps repo rate unchanged at 8 percent.
    * Reverse repo stays at 7 percent.
    * Cash reserve ratio cut by 25 basis points to
4.50 percent, effective from the fortnight beginning Sept. 22.
    * Statutory Liquidity Ratio stays at 23 percent of deposits.
    * Primary focus of monetary policy remains containing
inflation and anchoring inflation expectations.
    * Even as demand pressures moderate, supply constraints and
rupee depreciation are imparting pressures on prices.
    * As policy actions to stimulate growth materialise,
monetary policy will reinforce the positive impact of these
actions while maintaining its focus on inflation management.    
    * Government's recent actions have initiated a shift in
expenditure away from consumption (subsidies) and towards
investment (including through FDI).
    * See pressures on inflation in the short term due to upward
revision in diesel prices and rationalisation of LPG subsidy.
    * Revisions in diesel prices and LPG subsidy were
anticipated at the time of April policy.  
    * Risks from global factors, in terms of both capital
movements and oil prices, will persist.  
    * Outflows toward advance tax payments and the onset of
festival-related currency demand could accentuate pressures on
liquidity over the next few weeks. 
    * Wedge between deposit growth and credit growth could widen
on the back of the seasonal pickup in credit demand in the
second half of the year.    
    * Persistent inflationary pressures alongside risks emerging
from twin deficits, constrain a stronger response of monetary
policy to growth risks.
    * Full text of statement: here
    * Analyst comments on policy statement     

 (Compiled by Neha Dasgupta; Editing by Prateek Chatterjee)

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