Thursday, August 2, 2012

RBI policy review

RBI in its monetary policy review kept the policy rates unchanged and Statutory Liquidity Ratio(SLR) cut by 1%. Now the SLR is 23% as against 24% earlier. This cut is expected to provide liquidity of around Rs.60,000 crore.

SLR is the percentage of total deposits that lenders need to invest in the government bonds. The reduction is aimed at ensuring free flow of credit growth through enough liquidity in the system.

Cash Reserve Ratio or CRR is the portion of total deposits that banks are required to keep with the central bank also remained unchanged.

Because of the lower than expected rain fall RBI lowered its growth forecast to  6.5% from 7.3% as predicted in the April policy.

At the same time they  raised the inflation forecast from 6.5 per cent to 7 per cent.

India allows Pak Investment

In a move to improve trust between two nuclear powered nations India allowed Foreign Direct Investment(FDI) from Pakistan in India. From now on Pakistani individuals and companies will be allowed to invest in all sectors apart from defence, space and atomic energy.
Pakistan was the only country in the negative list under the Foreign Exchange Management Act(FEMA), which prohibits investing in India. 

Cabinet re-shuffle

In a major cabinet re-shuffle, current Home Minister P. Chidambaram appointed as Finance Minister while he was replaced by Power Minister Sushil Kumar Shinde in the Home Ministry. The charge of Power ministry is assigned to Veerappa Moily who currently has Law Ministry in his portfolio. This re-shuffle came after former Finance minister Pranab Mukherjee elected as the President. 

Worth reading