The Hindu Business Line : In tune with delinking of monetary measures

The central bank on Wednesday said Dr Y.V. Reddy, Governor, Reserve Bank of India, would announce the Annual Policy Statement for the year 2004-05 on May 18. Normally, the slack season credit policy is announced in April.

The credit policy itself will hereafter be known as ` RBI's annual policy statement' and not as the monetary and credit policy, the RBI spokesperson said.

Explaining the RBI's rationale for renaming the policy, the spokesperson said monetary measures had long since been de-linked from the policy per se and the measures announced over the past few years were related to credit and financial sector reforms.

Therefore, appropriate changes have also been made to the nomenclature.

While a section of bankers feel that the policy will not have any surprises, others believe that pending issues such as deregulation of the savings bank rates might be taken up.

" There might be some measures towards enhancing credit flow to industry and other sectors, further measures related to the real time gross settlement system (RTGS), some stringent measures to curtail frauds and NPAs in the housing loans business etc", said a banker.

Industry watchers expect the RBI to revisit the interest spreads issue as the apex bank is still understood to be unhappy with the `token' reductions made by banks, while adopting the much talked-about benchmark prime lending rates.

Bankers are also anxious about the measures the policy will hold in this regard, as most of them feel that reducing interest rates any further will impact their cost of funds.

"What is all the noise about interest rates being high? BPLR cannot go below 10.25-10.75 per cent at best. Besides, most corporates avail credit at sub-PLR rates anyways", said an official with a public sector bank.

Bankers also feel that the apex bank might relax the norm, of "20 per cent of unsecured advances and guarantees of banks not to exceed 15 per cent of their net bank credit".

Debt market players don't seem too sure about betting on a bank rate or CRR cut this time around, for the present.